The so-called maker-taker fee structure that U.S. exchanges have adopted is working just fine, says the Direct Edge CEO, respectfully disagreeing with other exchange CEOs.

“We are a big believer in all kinds of pricing structures that can meet different investor needs,” said O’Brien. “It’s economics 101.”

Bloomberg William OBrien, chief executive officer of Direct Edge

O’Brien says he has a lot for respect for Duncan Niederauer, CEO of NYSE Euronext  and Jeff Sprecher, the founder of the IntercontinentalExchange Group Inc. and the new owner of NYSE.

“Sprecher’s record of achievement at ICE is a great American success story, so none of this is personal,” says O’Brien.

“That being said, I think that is really unfortunate that instead of American investors looking at the exchanges as a source of inspiration, instead to say that the market is broken.”

While we can always work to make the market better, it generally works, said the Direct Edge CEO in a recent interview with MarketWatch.

Maker-taker is defined as an exchange or trading platform pricing system. Its basic structure gives a transaction rebate to market “makers” providing liquidity and charges a transaction fee to customers who take liquidity out of the market, “the takers.

Niederauer said on the topic he thinks it creates some unusual behavior.

I think simpler is always better, said Niederauer in a recent interview with MarketWatch.

Sprecher recently said that market regulators need to take a hard look at ‘maker-taker trading. in a recent interview with Reuters.

The Direct Edge CEO acknowledges that complexity changes the nature of risk. but says he doesn’t think reducing investor choice is better.

And to the extent that investors are only willing to take the risk under certain conditions, the transaction structure allows them to take that risk and price controls in the industry are setup to prevent price control manipulation, he says.

“There can be two good outcomes, both sides can have a positive outcome, said OBrien. You don’t necessarily have to have a winner and a loser.”

On transparency, the CEO notes “the fees are very transparent and are available” and are approved by the Securities and Exchange Commission. Talking of the SEC, OBrien says he is is a big fan of chairman Mary Jo White.

The CEO says he fully supports the holistic review that the SEC is taking on the maker-taker debate.

Tweeting on Twitter:  OBrien is one of the few CEOs who is vocal and active on Twitter   especially with Eric Scott Hunsader, the founder of Nanex, whose firm provides exchange data and summarizes high-frequency trading activity.

The CEO says his general reason on why he engages on Twitter is that he thinks the markets can be improved, but generally work. But that doesn’t mean there can’t be any criticism of market structure, he added.

“But at the same time, when you start from cynicism, its a path to disillusionment and failure,” said O’Brien. “And when I think there is a blatant misrepresentation, I am going to try to educate investors.”

On why he likes Twitter: “We need to start educating investors and you have to embrace new media. We live in an era where people are getting their information and education from different sources.

Direct Edge has plans to merge with BATS, which is expected to happen in February. The combined firm will place the exchange in the top one or two biggest exchanges in the U.S. according to industry watchers.

“We are excited about our planned merger with BATS and if you think about it, on any given day, we would be the biggest exchange operator in the U.S,” said O’Brien.

And if you combine the four U.S. exchanges together by equity dollar volume, we’d make up the biggest globally, noted the CEO.

“I am excited by what we can achieve for investors with that kind of scale,” said O’ Brien.

Sital S. Patel

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