DIRECT EDGE ECN TO MAKE ISE STOCK EXCHANGE A PARTNER AND SUBSIDIARY

Posted August 25, 2008

NEW YORK – Direct Edge Holdings, parent of the Direct Edge ECN, has reached an agreement to partner with the International Securities Exchange (ISE), making the ISE Stock Exchange a subsidiary of Direct Edge, and also giving Direct Edge direct access to the National Market System as well as better positioning to meet regulatory requirements for exchange status. The announcement comes days after BATS ECN won regulatory approval to become an exchange (see August 18 News Update).

“This partnership with the ISE will strengthen our competitive position by accelerating the evolution of Direct Edge as a major market center on several fronts,” says William O’Brien, Chief Executive Officer, Direct Edge. “By leveraging ISE’s technology and regulatory expertise and continuing to offer the innovative market structure and order types that have facilitated our significant recent growth, we will be poised to expand upon our established liquidity base and to provide our customers with an industry-leading exchange platform.”

Under the agreement, the strategic partners of both Direct Edge and the ISE Stock Exchange will have a combined 68.5 percent ownership interest in Direct Edge Holdings, with Knight Capital Group Inc., Citadel Derivatives Group, and Goldman Sachs each remaining as strategic investors with a 19.9 percent ownership interest. ISE will own the remaining 31.5 percent stake. ISE’s investment, which includes an increase in its investment in the ISE Stock Exchange, will be about $123 million. The transaction is expected to close in the fourth quarter of 2008, pending regulatory approvals.

“Through this transaction, we will be aligning ourselves with an innovative new leader whose compelling offering stands out in the highly competitive cash equity space,” says Gary Katz, President and Chief Executive Officer, ISE. “We have successfully grown the ISE Stock Exchange to the point where it is today, and are confident that this partnership with Direct Edge is the logical next step that will enable us to continue our strong growth in the US equities market.”

Direct Edge plans to continue its pursuit of exchange status for two new subsidiaries that would operate its EDGA and EDGX markets as national securities exchanges. Until such approval is granted, Direct Edge will display quotes on the ISE Stock Exchange and offer trade-through protection in the National Market System through that venue.