Exchanges head for OTC once again as CBOE Global Markets completes acquisition of BIDS Trading

BIDS Trading is the largest independent block trading ATS in the United States, and CBOE’s acquisition gives the firm a foothold in the off-exchange segment of the U.S. equities market. Why are brokers standing by and letting the vast venues aim firmly at the OTC market place?

The drive toward OTC derivatives trading by vast global exchanges continues.

Cboe Global Markets, Inc. (Cboe: CBOE), a market operator and global trading solutions provider, today announced it has completed its acquisition of BIDS Trading, a registered broker-dealer and the operator of the BIDS Alternative Trading System (ATS), the largest block-trading ATS by volume1 in the U.S.

Through ownership of BIDS Trading, Cboe gains a competitive foothold in the off-exchange segment of the U.S. equities market, which now accounts for more than 40 percent of overall U.S. equities trading volume. The acquisition of BIDS Trading also provides Cboe with the opportunity to expand its global footprint and diversify its product and service offerings in markets beyond U.S. equities and options.

The acquisition follows Cboe and BIDS Trading’s successful partnership in Europe, which began in 2016 with the creation of Cboe LIS for European equities block trading. Since its launch, Cboe LIS has grown to become one of the largest block trading platforms in Europe, accounting for approximately €240 million in average daily volume.

Cboe Global Markets Chairman, President and CEO Ed Tilly said: “Through our successful collaboration on Cboe LIS, Cboe and BIDS Trading have established a proven track record in delivering best-in-class block trading capabilities for European equities. We are excited to have Cboe’s reach extend into the off-exchange segment of the U.S. equity markets through its ownership of BIDS Trading, and to broaden our ability to potentially expand into other asset classes and geographies as well. I am pleased to welcome the entire BIDS Trading team to Cboe.”

Cboe will maintain the BIDS ATS as an independently managed and operated trading venue, separate from and not integrated with the Cboe U.S. securities exchanges. BIDS Trading Chief Executive Officer Tim Mahoney will remain in his current role and lead BIDS Trading as an independent business within Cboe Global Markets, reporting into an independent committee of the board of Cboe Global Markets.

BIDS Trading CEO Tim Mahoney said: “We have had a long and fruitful relationship with Cboe and have achieved remarkable success with Cboe LIS in Europe and we are excited by the additional opportunities and benefits that this acquisition could bring to BIDS Trading subscribers and sponsored users. We look forward to becoming a part of the Cboe Global Markets family and continuing to build on our history of successful innovation.”

Terms of the deal were not disclosed, however the company noted that the purchase price is not material from a financial perspective. BIDS Trading generated approximately $41 million in net revenue over the last 12 months ending September 30, 2020. Cboe also reiterated that it expects the acquisition of BIDS Trading to be immediately accretive to the company’s earnings, contributing adjusted earnings per share of approximately $0.05 – $0.06 in 2021.

Legal advisors to Cboe Global Markets on the transaction were Davis Polk & Wardwell LLP and WilmerHale, and financial advisors were Goldman Sachs & Co. LLC and Centerview Partners LLC. Legal advisors to BIDS Trading were Morgan, Lewis & Bockius LLP and Willkie Farr & Gallagher LLP, with Broadhaven Securities, LLC serving as financial advisor.

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