Cboe to buy Virtu's MATCHNow dark pool to expand into Canada

NEW YORK (Reuters) - Exchange operator Cboe Global Markets CBOE.Z said on Tuesday it is buying Canada's largest "dark pool" stock trading platform, MATCHNow, from Virtu Financial VIRT.O for an undisclosed amount to expand its geographical footprint.

FILE PHOTO: People walk by the Chicago Board Options Exchange (CBOE) Global Markets headquarters building in Chicago, Illinois, U.S., September 19, 2018. REUTERS/Michael Hirtzer

Uncertainty over the COVID-19 pandemic has led to a flurry of trading over the past few months and the volatility has benefited exchange operators like Cboe, the third-largest U.S. stock exchange operator by volume, which early this month reported record first-quarter revenue.

Cboe said it expects the acquisition of Toronto-based MATCHNow, an alternative trading system (ATS) where 5% to 7% of Canadian stocks by volume change hands, to close in the third quarter, pending regulatory approval.

ATS, also known as a dark pool, is an electronic trading venue where most information is kept private until after trades have been completed, reducing the chance of the market moving against the buyer or seller. Dark pool trading accounts for around 10% of Canadian equities volume.

“We’ve always had our eye on Canada,” Bryan Harkins, head of markets at Cboe, said in an interview. “It’s one of the leading equities markets in the world, high turnover, and there aren’t too many countries the size of Canada that are left on the map that you can really expand into, so we were opportunistic.”

Cboe ranks behind Intercontinental Exchange Inc's ICE.N NYSE and Nasdaq Inc NDAQ.O. It also runs the largest pan-European exchange operator, as well as options, foreign exchange, and futures exchanges.

The Chicago-based company’s foray into Canada follows a similar move by Nasdaq in early 2016, when it bought a dark pool called Chi-X Canada. In January 2018, Nasdaq won regulatory approval to open a stock exchange in Canada.

“One thing that we like about Canada is that you can operate as an exchange and you can also operate an ATS at the same time, so it creates a host of opportunities,” Harkins said.

Virtu, a global, multi-asset, market maker, acquired MATCHNow as part of its $1 billion deal for brokerage ITG in March 2019.

Virtu, which will still have substantial operations in Canada, said it made sense for MATCHNow to be in the hands of a global exchange operator.

“Following a competitive process, Cboe’s experience and technology resources stood out as uniquely capable of strengthening competition in the Canadian marketplace and as the best home for MATCHNow, its customers, and its employees,” Virtu Canada Chief Executive Officer Ian Williams said in a statement.

Reporting by John McCrank; Editing by Leslie Adler