By buying MatchNow, Cboe – headquarters seen here in Chicago in September, 2018 – hopes to gain a foothold in Canada, with plans to build a broader equities platform.MICHAEL HIRTZER/Reuters
Canada’s largest “dark pool” trading platform, MatchNow, has been sold to Cboe Global Markets Inc., a Chicago-based owner of exchanges that will enter the country as a new competitor.
Toronto-based MatchNow, officially known as TriAct Canada Marketplace LP, is an alternative stock trading system founded in 2007 and put up for sale late last year by its current owner, New York-based Virtu Financial Inc.
MatchNow differs from typical exchanges by allowing clients – most of which are investment dealers and institutional investors – to sell stock on its systems anonymously to avoid revealing their intentions. The company was expected to draw interest from domestic exchanges such as TMX Group, which owns the Toronto Stock Exchange and operates its own dark pools. TMX will be a key rival to Cboe as the U.S. company vies for a slice of an increasingly competitive market for electronic trading.
By buying MatchNow, Cboe hopes to gain a foothold in Canada, with plans to build a broader equities platform. Cboe owns the Chicago Board Options Exchange as well as stock exchange operator BATS Global Markets and operations in Europe. Canada was “an obvious extension to us,” chief executive officer Edward Tilly said.
“We’ve been looking at Canada as a nicely-sized market," he said in an interview.
Last year, nearly 65 per cent of all dark trading in Canada ran through MatchNow, which accounted for 7 per cent of all Canadian equities trading volume, according to Cboe. But competitors have gained ground.
“We won’t be happy with 7 per cent [market share]," Mr. Tilly said. “We get the competition, we know what incumbents can do, and we’re ready."
Virtu Financial acquired MatchNow last year as part of a US$1-billion takeover of rival electronic trading platform Investment Technology Group Inc. But after a strategic review, Virtu decided it wasn’t a core asset and “could offer more to market participants if it was powered by the scale of a global exchange operator,” Ian Williams, CEO of Virtu Canada, said in a news release.
Terms of the deal were not disclosed. Virtu and Cboe expect the transaction to close in the third quarter this year, subject to regulatory approvals, and Virtu plans to use the proceeds to pay down debt.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.