The news that Direct Edge has received approval to convert its two ECNs into exchanges brings the number of ECNs in the US down to three, accounting for only 1% of market volume. This is a remarkable turnaround from the days when ECNs were seen as the challengers to the exchanges.
The conversion of ECNs into exchanges in the US seems to be in contrast to Europe, where MTFs (their European cousins) are gaining market share at the expense of the established exchanges.
What accounts for the difference? Does the balance of regulatory obligations and benefits favour exchanges in the US but MTFs in Europe? Or does the success of the MTFs have less to do with regulatory advantage and more to do with technology and market positioning? (And not all MTFs have been a wild success, of course.)