International Securities Exchange, one of the largest US options markets, on Friday became the largest shareholder in Direct Edge, an alternative equities trading platform.

Direct Edge claims a roughly 10 per cent share of all US listed equities trading volume in the US.

The deal between Direct Edge and the ISE marks the first involvement by a European exchange in the competitive US equities market. ISE is majority owned by Eurex, itself the derivatives arm of Frankfurt-based Deutsche Börse.

Direct Edge is owned by a consortium including Knight Capital Group, Citadel, a Chicago-based hedge fund, and Goldman Sachs.

Under the deal ISE Holdings, the parent company of ISE Stock Exchange, will invest $123m in Direct Edge, giving it a 31.5 per cent stake and operational control of Direct Edge.

As part of the transaction Knight, Citadel and Goldman Sachs will reduce their stakes to 19.9 per cent each.