Cboe Completes Acquisition of Virtu’s Dark Pool MatchNow

Virtu acquired MatchNow as part of its $1-billion acquisition of electronic brokerage Investment Technology Group in March 2019.

Cboe Global Markets said today, it has completed the takeover of Canada’s largest ‘dark pool’ stock trading platform, MatchNow, from Virtu Financial for an undisclosed price.

The deal was initially signed back in May, nearly 14 months after New York-based Virtu Financial Inc. acquired MatchNow. This was part of its $1-billion buyout of electronic brokerage Investment Technology Group in March 2019.

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MatchNow, officially known as TriAct Canada Marketplace LP, has attracted interest from Canadian bourse TMX Group and rival exchange Aequitas Innovations Inc., which owns Neo Exchange. Other foreign stock exchanges and private equity funds were also interested, as many of them wanted to increase their stake in the rapidly growing world of so-called dark pools.

The private trading platforms, typically geared toward big investors, have enjoyed a growing market share this year. MatchNow commanded more than 5 percent of total stock trading and 65 percent of anonymous trades in Canada, where over $5 billion worth of equities exchange hands each day. According to recent statistics, the Toronto-based platform facilitated buying and selling of about 1.2 billion shares a month, carrying out more than 2 million trades.

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Increasing Scrutiny on Dark Pools

From a strategic point of view, Cboe indicated that the acquisition of MatchNow aligns with its overall growth strategy and gives it a foothold in the Canadian equity trading business, which it plans to grow.

“Ownership of MATCHNow is also expected to provide Cboe with a strategic pathway to build towards a comprehensive equities platform for the Canadian markets and potentially establish a significant presence in the region,” Cboe said in announcing the deal.

Virtu Americas LLC (formerly KCG Americas LLC) is also operating another alternative trading system, called Virtu MatchIt. Earlier last year, it agreed to pay the Securities and Exchange Commission $1.5 million to settle allegations that its dark pool exceeded trading volume thresholds on certain securities.

Dark pools are private electronic trading sites that allow institutional investors to anonymously trade large blocks of shares without being visible to other traders until they are executed. The anonymity of price tags is designed to help investors trade large blocks of shares without the market moving against them.

In recent years, dark pools have attracted increasing scrutiny amid warnings by exchanges and lobby groups. This is focused on the lack of pre-trade transparency, perceived unfairness, and the potential exploitation of some dark pool users.

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