A Top Dark Pool Draws Takeover Interest From Cboe

(Bloomberg) -- Cboe Global Markets Inc. is exploring buying Bids Trading LP, which runs one of the largest U.S. dark pools, according to people familiar with the matter.

Cboe has held formal talks to acquire Bids, said one of the people, who asked to not be identified because the discussions aren’t public. No decision has been made and Bids could opt to remain independent.

Representatives for New York-based Bids and Chicago-based Cboe declined to comment.

Bids is one of dozens of private venues that compete with public markets including the New York Stock Exchange, Nasdaq Inc. and Cboe. What sets it apart is its emphasis on block trades, or big orders placed by large investors that are difficult to execute on public exchanges.

While most dark pools are owned by a single bank, Bids is backed by a consortium that includes Bank of America Corp., JPMorgan Chase & Co. and Citigroup Inc. Bloomberg LP, the parent of Bloomberg News, also owns a stake.

Bids and Cboe already work together. Bids powers the Cboe Large In Scale service, a European block trading venue.

Exchanges have bemoaned the fact that they’ve lost volume over the past decade and a half to dark pools and other private venues. Today, almost 40 percent of trading takes place off exchanges. Last month, Bids’s investors including Virtu Financial Inc. and Morgan Stanley announced plans to expand beyond dark pools by forming their own stock exchange to compete with Nasdaq, Cboe and Intercontinental Exchange Inc.’s NYSE.

Investment Technology Group Inc. was interested in Bids last year, the people familiar with the matter said, but that’s off the table with ITG’s pending sale to Virtu. A representative for ITG declined to comment.

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