Cboe Global Markets has entered into a definitive agreement to acquire BIDS Trading, a registered broker-dealer and the operator of the BIDS Alternative Trading System (ATS), the largest block-trading ATS by volume in the US.
The transaction, which Cboe plans to fund with debt, is expected to close in early 2021, subject to regulatory review and other customary closing conditions. Terms of the deal were not disclosed, but the company noted that the purchase price is not material from a financial perspective.
Cboe said the deal would diversify its US equities offering beyond traditional exchange products and services. BIDS Trading’s block trading capability will provide Cboe with a significant foothold in the off-exchange segment of the US equities market, which now accounts for over 40% of overall U.S. equities trading volume.
The two companies struck a partnership four years ago to launch Cboe LIS, a European equities block trading venue which has grown into one of the largest block trading platforms in Europe, with average daily volume of approximately €240m
“We are pleased to build upon our innovative and successful partnership with BIDS Trading,” said Ed Tilly, Cboe Global Markets Chairman, President and Chief Executive Officer. “The acquisition complements our U.S. equities trading business by expanding our presence into the off-exchange space.”
He added, “We are excited by the opportunity to further diversify and expand our equities trading offering and begin competing in this segment of the market.” BIDS Trading generated around$42 million in net revenue over the last 12 months ending June 30, 2020 and is expected to be immediately accretive to the company’s earnings, contributing adjusted earnings per share of approximately $0.05 – $0.06 in 2021
Cboe expects to maintain the BIDS ATS as an independently managed and operated trading venue, separate from and not integrated with the Cboe while BIDS Trading Chief Executive Officer Tim Mahoney is expected to remain in his current role and report into an independent committee of the board of Cboe Global Markets.
While market reaction was positive to the deal, Sylvain Thieullent, CEO of Horizon Software, a provider of electronic trading systems to financial institutions said, “As part of a wider industry drive to better serve the end investor, exchanges like Cboe know they have a responsibility to ensure trades can happen in a fair and well-balanced market. As the bigger venues continue to get bigger, it is paramount that members are not trading too far away from what could be considered to be the fair value price.”