Cboe Global Markets Agrees to Acquire Canadian ATS MATCHNow

Cash is king.

Cboe Global Markets, one of the world’s largest exchange holding companies, today announced it has entered into a definitive agreement to acquire MATCHNow, the largest equities alternative trading system (ATS) in Canada, from Virtu Financial, in an all cash deal.

Terms of the sale were not disclosed.

Upon successful completion of this acquisition, Cboe will gain a foothold in a key capital market new to the company, while expanding the geographic presence and diversifying the product capabilities of its North American equities business. 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.

Sean Debotte, CEO of Canada-based Independent Trading Group, spoke with Traders Magazine on the acquisition and noted a few particulars.

“The management team at MatchNow is great and have done an excellent job of building it,” Debotte said. “They (MatchNow) are the most liquid dark pool in the country. CBOE brings some excellent technology to the equation.”

Additionally, Debotte said that the CBOE acquisition of BATS/EDGE made them the largest exchange operator but also one of the most technologically advanced and that technology could filter into the Canadian equity marketplace.

“CBOE is obviously big in derivatives and the Canadian derivatives space has no competitors,” Debotte continued. “The Montreal Exchange (owned by TMX Group) is still the only exchange for ALL Canadian options and futures. Maybe this is the strategy: Upgrade the tech and go after the derivatives business? I’m just speculating here, but it would be a good play.”

MATCHNow, Canada’s largest broker-neutral dark pool, accounts for nearly 65 percent market share in total Canadian dark trading, or approximately 7 percent in total Canadian equities volume.1 Canada is one of the world’s leading equities markets, where Cboe sees further growth potential driven by off-exchange trading, the recent opening of the market to multi-venue competition and overall robust economic growth.

Bryan Blake, CEO and Managing Director at TriAct Canada said he was excited for MATCHNow and the growth he expects to see with Cboe.

Cboe said it plans to invest in MATCHNow’s growth, and deploy MATCHNow’s innovative products, solutions and industry expertise to serve Canadian equity markets and investors. The transaction reflects Cboe’s broader growth strategy, which includes targeting acquisitions that have the potential to accelerate  its geographic and asset class presence, while deepening its customer reach.

Ed Tilly, Chairman, President and Chief Executive Officer of Cboe Global Markets, said: “MATCHNow offers an innovative equities platform, pioneering spirit and customer-first approach that are complementary with Cboe’s equities business. 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. With our U.S. and European presence covering many of the world’s largest equities marketplaces, we are excited to enter the Canadian market.”

Bryan Blake, Chief Executive Officer of MATCHNow, said: “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. The Cboe team has a history of developing equities markets and we look forward to enhancing our capabilities further by leveraging Cboe’s core strengths as a leading global exchange operator.”

Designed to offer enhanced execution for institutional, retail and proprietary order flow, MATCHNow combines frequent call matches and continuous execution opportunities in a fully confidential trading book. It is also a top provider of Conditional Orders, a product that is seeing growing adoption in Canada and could become a meaningful contributor to
MATCHNow’s volume growth.

The transaction, which Cboe plans to fund with cash on hand, is expected to close in the third quarter of 2020, subject to regulatory approvals and other customary closing conditions.

Terms of the deal were not disclosed, however, the company noted that the purchase price is not material from a financial perspective. The acquisition is expected to be immediately accretive to earnings, contributing approximately $0.01 to earnings per share in 2020. MATCHNow is a profitable business that generated over CAD10 million in revenue in 2019.

This follows Cboe’s December announcement that it entered into a definitive agreement to acquire EuroCCP, a pan-European equities clearing house. The transaction will bring together two companies that have long championed competition, open access and clearing interoperability in Europe. Additionally, Cboe’s ownership of EuroCCP is expected
to provide opportunity to pursue the development of equity derivatives trading and clearing capabilities in the region, subject to regulatory approvals.

As of the close of 2019, EuroCCP currently clears trades for 39 trading venues, which represent close to 95 percent of Europe’s equity landscape, making it the most connected equity central counterparty (CCP) in the region.

EuroCCP clears on average between four to five million trade sides daily, totalling €30 to €40 billion in value, and provides clearing members with easy access and the ability to maximize operational efficiency and netting opportunities while
reducing risk and cost.