Cboe Closes Acquisition of Dark-Pool Operator BIDS Trading

Chicago-based Cboe (Nasdaq: CBOE) today confirmed it has completed its takeover of dark-pool stock trading platform, BIDS Trading, the largest block-trading ATS by volume in the US, for an undisclosed price.

First announced in October, the deal for the alternative trading system (ATS) will provide Cboe with further inroads into the expanding world of off-exchange trading. Terms of the deal were not disclosed, but the exchange operator said the purchase price is not “material from a financial perspective.”

Cboe plans to fund the transaction with debt and maintain the registered broker dealer as an independently managed and operated trading venue.

BIDS Trading, which generated $42 million in net revenue over the last 12 months ending September 2020, has attracted interest from rival exchanges. 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 acquisition of BIDS Trading comes shortly after Cboe bought MatchNow from Virtu Financial. The broker-neutral dark pool 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.

Cboe Heads off-Exchange with Major Deals

The private trading platforms, typically geared towards big investors, have enjoyed a growing market share this year. From a strategic point of view, Cboe indicated that the acquisition of MatchNow and BIDS Trading aligns with its overall growth strategy and gives it a foothold in the equity trading business, which it plans to grow.

Commenting on the news, Cboe CEO, Ed Tilly said: “Through our successful collaboration on Cboe LIS, Cboe and BIDS Trading have established a proven track record in delivering best-in-class block trading capabilities for European equities. We are excited to have Cboe’s reach extend into the off-exchange segment of the U.S. equity markets through its ownership of BIDS Trading, and to broaden our ability to potentially expand into other asset classes and geographies as well.”

BIDS Trading CEO, Tim Mahoney added: “We have had a long and fruitful relationship with Cboe and have achieved remarkable success with Cboe LIS in Europe, and we are excited by the additional opportunities and benefits that this acquisition could bring to BIDS Trading subscribers and sponsored users. We look forward to becoming a part of the Cboe Global Markets family and continuing to build on our history of successful innovation.”

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.