Cboe to buy dark pool operator BIDS Trading to broaden equities offerings

October 16, 2020.

has struck a deal to acquire New York-based BIDS Trading, a broker dealer and operator of the biggest independent block-trading alternative trading system in the U.S. by volume, the Chicago-based exchange operator said Friday.

The planned acquisition will help Cboe diversify and expand its U.S. equities offerings beyond its “traditional exchange” products and services, as BIDS runs dark pools that allow investors to trade without exposing the details until after the trade has been completed. Getting into these pools will allow the exchange operator to gain a “significant foothold” in the off-exchange side of the U.S. equities market, which currently accounts for more than 40% of the market’s trading volume, according to Cboe. 

The transaction is expected to be completed in early 2021, subject to regulatory approval. Terms of the deal were not disclosed, but Cboe said it plans to fund the purchase with debt. Ultimately, the company expects the deal to contribute $0.05 to $0.06 to its adjusted earnings per share in 2021. 

Cboe has already been working with BIDS Trading since 2016 to implement block trading services in the European equities market. Together, they created Cboe LIS, a European equities block trading platform, which is now one of the largest block trading platforms in Europe with an average daily volume of around EUR 240 million ($281.3 million), Cboe said. 

Now, with the acquisition, Cboe is expecting to further expand its presence in the North American equities market. 

“We are pleased to build upon our innovative and successful partnership with BIDS Trading,” Cboe Global Markets Chairman, President and CEO Ed Tilly said. “The acquisition complements our U.S. equities trading business by expanding our presence into the off-exchange space.”

Additionally, Cboe said it hopes to create more off-exchange products and services in non-U.S. equities or options products and in other geographical markets by leveraging BIDS Trading’s “differentiated network of global buy-side investment managers and sell-side constituents.”

Cboe also plans to maintain BIDS ATS as an independently managed and operated venue and keep it separate from its U.S. securities exchanges, it said, adding that BIDS Trading current CEO Tim Mahoney will remain in the role and report to an independent committee of the board of Cboe Global Markets.

“The partnership Cboe and BIDS Trading have established in Europe has been very successful and we look forward to joining the Cboe Global Markets family,” Mahoney said. “We believe joining the Cboe family will enable us to pursue additional opportunities that are beneficial to BIDS Trading subscribers and sponsored users as Cboe continues to expand its business across new geographies and reaches new customers.”

Davis Polk & Wardwell and WilmerHale served as legal advisors to Cboe Global Markets on the transaction and and Centerview Partners worked as its financial advisors, while Morgan, Lewis & Bockius served as the legal advisor to BIDS Trading, with Broadhaven Securities serving as its financial advisor.