Chicago-based exchange holding company, Cboe Global Markets, today announced it has entered into a definitive agreement to acquire the MATCHNow  Dark Pool  Dark Pool Private exchanges that are not accessible by the investing public for trading securities are known as dark pools.Dark pools are named due to their lack of transparency and occasional predatory trading practices that are performed by high-frequency traders. These exchanges originally into existence towards the end of the 1980s as a way to better facilitate block trading performed by institutional investors. Why Use Dark Pools?Dark pools are used primarily by large-scale investors who do not seek to sway markets through enormous trading positions or incur adverse prices due to their large transactions. Of note, dark pools don’t require investors to disclose their trading intentions prior to trade execution.As such, there is no order book or ledger available to the public while performed trades are released after a delay in the ticker tape, also known as the system that reflects real-time exchange-listed data. More than 48 dark pools have been registered with the Securities and Exchange Commission (SEC) while dark pools can be divided into three classifications. Dark pools that derive their own price rates from order flow implement an element known as price discovery. This is seen characteristic of dark pools that are broker-dealer owned and electronic market makers. Electronic market makers, such as Getco, are independently operated dark pools who function as administrators for their own account. Examples of broker-dealer owned dark pools include Goldman Sachs’ Sigma X, Morgan Stanley’s MS Pool, and Citibank’s CitiMatch. Dark pools that are broker-dealer owned are structured to fulfill the needs of their clients and sometimes their own team of proprietary investors. An exchange-owned or agency broker dark pool serve as agents, not administrators, while prices stem from exchanges such as the National Best Bid and Offer (NBBO). An example of exchange-owned dark pools includes the NYSE Euronext while the Instinet Liquidnet is an example of an agency broker dark pool. Despite the notoriety that surrounds dark pools, dark pools serve an essential function and can significantly reduce market sways by large scale trades. Private exchanges that are not accessible by the investing public for trading securities are known as dark pools.Dark pools are named due to their lack of transparency and occasional predatory trading practices that are performed by high-frequency traders. These exchanges originally into existence towards the end of the 1980s as a way to better facilitate block trading performed by institutional investors. Why Use Dark Pools?Dark pools are used primarily by large-scale investors who do not seek to sway markets through enormous trading positions or incur adverse prices due to their large transactions. Of note, dark pools don’t require investors to disclose their trading intentions prior to trade execution.As such, there is no order book or ledger available to the public while performed trades are released after a delay in the ticker tape, also known as the system that reflects real-time exchange-listed data. More than 48 dark pools have been registered with the Securities and Exchange Commission (SEC) while dark pools can be divided into three classifications. Dark pools that derive their own price rates from order flow implement an element known as price discovery. This is seen characteristic of dark pools that are broker-dealer owned and electronic market makers. Electronic market makers, such as Getco, are independently operated dark pools who function as administrators for their own account. Examples of broker-dealer owned dark pools include Goldman Sachs’ Sigma X, Morgan Stanley’s MS Pool, and Citibank’s CitiMatch. Dark pools that are broker-dealer owned are structured to fulfill the needs of their clients and sometimes their own team of proprietary investors. An exchange-owned or agency broker dark pool serve as agents, not administrators, while prices stem from exchanges such as the National Best Bid and Offer (NBBO). An example of exchange-owned dark pools includes the NYSE Euronext while the Instinet Liquidnet is an example of an agency broker dark pool. Despite the notoriety that surrounds dark pools, dark pools serve an essential function and can significantly reduce market sways by large scale trades. Read this Term for Canadian equities from Virtu Financial.

The transaction, which Cboe plans to fund with cash on hand, is expected to close in the third quarter of 2020, subject to regulatory approvals and other customary closing conditions.

Cboe said that upon successful completion of this acquisition, it will gain a foothold in a key capital market new to the company, while expanding the geographic presence and diversifying the product capabilities of its North American equities business.

Establishing a presence in Canada

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.

MATCHNow is Canada's largest broker-neutral dark pool, accounting for nearly 65 percent market share in total Canadian dark trading, or approximately 7 percent in total Canadian equities volume.

Canada is one of the world's leading equities markets, where Cboe sees further growth potential driven by off-exchange trading, the recent opening of the market to multi-venue competition and overall robust economic growth.

Cboe has a proven track record in integrating and growing acquisitions. The firm plans to invest in MATCHNow's growth, and deploy MATCHNow's innovative products, solutions and industry expertise to serve Canadian equity markets and investors. The transaction reflects Cboe's broader growth strategy, which includes targeting acquisitions that have the potential to accelerate its geographic and asset class presence, while deepening its customer reach.

An innovative equities platform

"MATCHNow offers an innovative equities platform, pioneering spirit and customer-first approach that are complementary with Cboe's equities business. This is a highly strategic acquisition that enables us to expand into a new key geography, and strengthens our position as a global leader in providing innovative solutions and technology to enhance our customers' trading experience. With our U.S. and European presence covering many of the world's largest equities marketplaces, we are excited to enter the Canadian market," Ed Tilly, chairman, president and CEO of Cboe Global Markets, said in a statement.

"Cboe will bring an innovative mindset, economies of scale, market expertise and client distribution that can further propel MATCHNow's growth and inject robust competition into the Canadian marketplace. The Cboe team has a history of developing equities markets and we look forward to enhancing our capabilities further by leveraging Cboe's core strengths as a leading global exchange operator," Bryan Blake, CEO of MATCHNow, noted.

Offering enhanced  Execution  Execution Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a common marketing point of emphasis by brokers, whose action execution varies considerably from company to company. When execution prices are not matching the submitted price the client is charged or credited the difference resulting from the negative or positive slippage.Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. Best Execution a Legal ObligationBrokers are required by law to diver to their clients the best execution possible. Some regulators are requiring brokers to submit execution stats in order to assess the quality of their services. Other brokers are regularly posting execution statistics in order to boost the confidence of their clients in the best execution commitment of the company.Best execution has been a point of emphasis in recent years from both retail and institutional players in the FX industry. Negotiating and executing transactions in order to promote a robust, fair, open, liquid and appropriately transparent FX market is identified as one of the six main principles outlined in the FX Global Code of Conduct, which came into effect in 2018. Execution is the process during which a client submits an order to the brokerage, which consequently executes it resulting in an open position in a given asset. The execution of the order occurs only when it is filled. There is typically a time delay between the placement of the order and the execution which is called latency.In the retail FX space, reliable brokers always strive to deliver best execution to their clients in order to maintain a solid business relationship with them. This is a common marketing point of emphasis by brokers, whose action execution varies considerably from company to company. When execution prices are not matching the submitted price the client is charged or credited the difference resulting from the negative or positive slippage.Slippage is a very contentious issue among retail traders, which can lead to issues. Many traders view levels of slippage at brokers as a key determinant for their business. Best Execution a Legal ObligationBrokers are required by law to diver to their clients the best execution possible. Some regulators are requiring brokers to submit execution stats in order to assess the quality of their services. Other brokers are regularly posting execution statistics in order to boost the confidence of their clients in the best execution commitment of the company.Best execution has been a point of emphasis in recent years from both retail and institutional players in the FX industry. Negotiating and executing transactions in order to promote a robust, fair, open, liquid and appropriately transparent FX market is identified as one of the six main principles outlined in the FX Global Code of Conduct, which came into effect in 2018. Read this Term for institutional, retail and proprietary order flow, MATCHNow combines frequent call matches and continuous execution opportunities in a fully confidential trading book.

It is also a top provider of Conditional Orders, a product that is seeing growing adoption in Canada and could become a meaningful contributor to MATCHNow's volume growth.