Two of the biggest alternative trading systems in the U.S., BATS Global Markets, Inc. and Direct Edge Holdings LLC, have agreed to merge.

BATS and Direct Edge announced a definitive merger agreement Monday that will bring together the two trading systems under the BATS Global Markets brand. The financial terms of the deal will not be disclosed, the firms said. They expect the transaction to close in the first half of 2014, subject to regulatory approvals.

The combined company will use BATS’ trading technology and will be headquartered in its hometown of Kansas City; with additional offices in Jersey City, NJ, New York and London. All four U.S. equity exchanges operated by BATS and Direct Edge will remain in operation under the agreement; as will BATS’ U.S. equity options market and BATS Chi-X Europe. Direct Edge will continue to work towards opening an equity market in Brazil, they noted.

“This agreement is an important milestone for the U.S. equities market and other markets around the globe as it will combine two organizations that have been innovative in creating a more competitive marketplace to benefit all investors,” said BATS’ CEO, Joe Ratterman, who will remain in that position with the combined company.

Direct Edge’s CEO, William O’Brien, will become president of the combined firm. “Direct Edge and BATS were both founded on a commitment to create an optimal trading experience for a diverse member base, from retail investors to broker-dealers to institutions. Together, the best of both organizations will work to further improve how the world trades, consumes market data, and accesses capital markets,” he said.

Standard & Poor’s Ratings Services has placed its ratings for BATS on CreditWatch Positive after the deal was announced, citing its beefed up competitive strength in the U.S. equity markets.

On its own, BATS is the fourth-largest stock exchange in the U.S. and the largest pan-European equities trading venue, S&P notes; and, it is teaming up with Direct Edge, which is the third largest exchange in the U.S. Combined, they would have a 21.5% market share in U.S. equities, as of July; and, BATS already has a 22.9% market share in European equities.

“In our view, the combined company could benefit from stronger market position and potential cost savings,” said Standard & Poor’s credit analyst, Olga Roman.

“While there is significant overlap between BATS’ and Direct Edge’s product offerings and customers, we believe this merger would significantly increase BATS’ market share, enhance the firm’s ability to compete in the U.S. marketplace, and strengthen the financial risk profile,” she added.

The deal is subject to U.S. antitrust clearance and regulatory approval in the U.S. and UK. S&P expects to resolve the CreditWatch status upon the completion of the merger, which the two companies expect in the first part of 2014.