CBOE to acquire Canadian alternative trading system

U.S. derivatives exchange firm Cboe Global Markets Inc. is venturing into Canada with the acquisition of alternative trading system MATCHNow.

Chicago-based Cboe announced that it has a definitive agreement to buy the Canadian ATS from New York’s Virtu Financial Inc. for an undisclosed price.

The deal, which requires regulatory approval, is expected to close in the third quarter.

From a strategic point of view, Cboe indicated that the acquisition of the ATS — which accounts for approximately 65% of Canadian dark trading and 7% of overall equity trading volume — gives it a foothold in the Canadian equity trading business, which it plans to grow.

“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,” Cboe said in announcing the deal.

Cboe also said that the transaction aligns with its overall growth strategy, which includes expanding its presence in new regions and asset classes.

“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,” said Ed Tilly, chairman, president and CEO of Cboe, in a statement.

“With our U.S. and European presence covering many of the world’s largest equities marketplaces, we are excited to enter the Canadian market,” he added.

“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,” added Bryan Blake, CEO of MATCHNow.

From a financial perspective, Cboe said that the acquisition is expected to be immediately accretive to earnings, adding approximately US1¢ to earnings per share in 2020.

Virtu said that its proceeds from the deal will be used to repay a portion of its outstanding debt.

“After a thorough analysis, we concluded that MATCHNow is a valuable asset that could offer more to market participants if it was powered by the scale of a global exchange operator,” said Ian Williams, CEO of Virtu Canada, in a statement.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.