Nasdaq Inc., the second largest stock exchange in the world, and Goldman Sachs Group are teaming up to launch a new ‘dark pool’ accord that will see the deployment of Sigma X, according to a Nasdaq statement.
The joint launch of Sigma X is noteworthy as it represents the first such instance of a bank outsourcing its technology to Nasdaq for the use of dark pool trading. As a result of the deal, Nasdaq will be operating the majority of Sigma X, whereby relying on outsourced back-end technology, which includes compliance and surveillance tools, to its dark pool operator, called ‘Ocean’.
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The deal still requires the necessary regulatory approval and has been over a year in the making. By partnering with Nasdaq, Goldman Sachs can also help bring more trading to its system without having to shoulder the costs of compliance, which in recent years has crept up substantially, impacting a wide range of operations for lenders in the US.
Despite outsourcing its technology to Nasdaq, Goldman Sachs will be bearing the regulatory responsibility for the execution of Sigma X. The nature of the deal itself stems almost entirely from the circumvention and burden or regulatory costs, which both companies are keen to satisfy on their own terms.
US regulatory authorities have made it clear that they are not warm to the idea of Nasdaq operating its own domestic dark pool, which ultimately caused the company to change its plans, settling on a partnership with Goldman Sachs.
Earlier today, Nasdaq made headlines after it launched ‘Nasdaq Trading Insights’, a product suite designed to help traders better understand their performance in the market, how the market behaves and how they can adjust their strategies accordingly in order to become more successful.