Bats Global Markets has received formal approval from the U.K. Competition Commission for its proposed acquisition of Chi-X Europe, the largest pan-European equity exchange platform by market share and notional value traded.

The announcement comes about a month after the commission gave preliminary approval for the deal. The combined entity, to be known as Bats Chi-X Europe, is expected to realize between $8 million and $10 million in cost savings annually.

“The main reason exchanges look to merge is cost opportunity,” said Richard Perrott of Berenberg Bank. “It’s been the primary reason for driving exchange mergers in the past. You have two different IT systems, two sets of sales people, why not just trade all those products under a single platform and reduce your cost base.”

“It is both exciting and rewarding to be on the cusp of closing this strategic deal and we thank our customers and investors for their support during the review process,” said Joe Ratterman, chairman and chief executive officer of Bats Global Markets. “We will now focus on completing the combination of Bats Europe and Chi-X Europe to create an even more formidable competitor in pan-European securities trading, offering greater market efficiencies for the entire investing community.”

The deal is on track to close before the end of the year.

The combined entity will represent about a quarter of all European equities trading. In the third quarter, Chi-X Europe accounted for about 19.5% while Bats Europe represented about 5.5%.

The acquisition of Chi-X Europe was announced earlier this year in February. It then announced in May its plans to go public in a $100 million initial public offering. Initially slated for late 2011, the IPO is now expected to occur in early 2012 as the company awaits the closing of the Chi-X Europe acquisition. U.S. regulators in August gave approval for Bats to start listing shares, allowing the Kansas City-based trading platform to compete directly with exchange operators NYSE Euronext and Nasdaq OMX.

In a regulatory filing with the Securities and Exchange Commission last month, Bats said that it would rack up in excess of $9 million in costs in its bid for Chi-X Europe. Among them are fees to be paid to advisors, including lawyers and accountants as well as for retaining staff. In addition, should the deal fall through, Bats would owe Chi-X a $7 million break-up fee.