Financial terms of the deal - set to close in the second quarter subject to regulatory approval - were not disclosed, but Bloomberg, citing sources, says Kansas City-based Bats will pay $300 million plus $65 million in potential future payouts for its rival.

Chi-X Europe was launched in 2007 by Japan's Nomura through inter-agency broker Instinet, to take on traditional exchanges such as the LSE and Deutsche Börse in the wake of MiFID. Instinet now has a 34% stake, with a group of 12 banks and trading firms - including Citi, Goldman Sachs, UBS and Citadel - holding the rest of the shares.

Since launch, the MTF has used faster trading technology and lower fees to attract market share from incumbents - it now attracts around a quarter of trading in FTSE 100 shares - and moved into profit last year.

In August the platform confirmed that it had received a bid enquiry, which was widely believed to have come from Bats and has now finally hammered out a deal.

Bats is an upstart itself, launching a US ECN in 2006 although it has since obtained exchange status. In 2008 it entered Europe, becoming a direct Chi-X competitor but has a far smaller market share.

Combined, the pair, to be called Bats Chi-X Europe, claim they will be the largest pan-European trading centre in terms of market share and notional value traded. Thomson Reuters data shows the firm will have 23% of the European trading market, compared to a merged Deutsche Boerse and Nyse Euronext on 29.7%.

Joe Ratterman, president and CEO, Bats, says: "This transaction joins two successful and innovative market centres and will be a tremendous boost for competition in pan-European trading in the face of increasing consolidation among incumbent exchanges. Bats was drawn to Chi-X Europe because of our many similarities, particularly in the areas of culture, technology, market structure and innovation."

The agreement follows deals in the past couple of weeks between Deutsche Boerse and Nyse Euronext and the LSE and Canada's TMX Group while speculation continues about a possible tie-up between Nasdaq OMX and IntercontinentalExchange.