Goldman Sachs Group Inc. agreed to hand over day-to-day operations of Sigma X, its "dark pool" platform for U.S. stocks trading, to Nasdaq Inc. in a first-of-its-kind partnership.
The deal, which is subject to regulatory approval, comes as the Securities and Exchange Commission has toughened its scrutiny of so-called dark pools -- private venues for trading stocks. New rules and a series of SEC fines have made it costlier for banks to run the platforms.
Under the agreement, Nasdaq will run the software and hardware that underpins Sigma X, while Goldman will continue to own the platform and market it to the bank's clients.
"This partnership allows GS to capitalize on the expertise and experience of a scale provider of exchange technology used in 33 Nasdaq and many other marketplaces world-wide," a bank spokeswoman said in a statement on Monday.
A Nasdaq spokesman confirmed the agreement.
The move could help Goldman comply with Regulation Systems Compliance and Integrity, or Reg SCI, a set of SEC rules that took effect last year that aims to boost the reliability and cybersecurity of the U.S. stock market. Sigma X, the 10th largest dark pool in the U.S., isn't large enough to be covered by Reg SCI but Goldman has been seeking to expand its market share.
For Nasdaq, the agreement marks the first win for its OCEAN dark pool-hosting business. The exchange operator has been pitching the service to banks and brokerages that run dark pools, offering to manage the back-end technology that powers them. Offering such services would help Nasdaq win a slice of the trading revenues that flow into the off-exchange venues.
Dark pools became widespread in the 2000s, driven by banks seeking to save on the fees they paid to exchanges. There are currently about 40 of them. The venues aren't required to display price quotes to the public in the same way exchanges do. That has historically made them attractive to firms that want to buy or sell large quantities of stock without tipping off the rest of the market about their intentions. Initially dark pools were lightly regulated, but that has shifted in the past several years as regulators have cracked down on some of their practices.
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(END) Dow Jones Newswires
November 01, 2016 10:55 ET (14:55 GMT)
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