By Alexander Osipovich
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 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 toown the platform and market it to the bank's clients.
The terms of the agreement weren't disclosed.
"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 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.
Goldman is the first client Nasdaq has signed 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 -- which would help Nasdaq get a slice of the trading revenues that flow into the off-exchange venues.
Dark pools became widespread in the 2000s, as banks sought to save on the fees they paid to exchanges. There are about 40 of them now. The venues aren't required to display price quotes to the public in the same way exchanges do, which has made them attractive to firms wanting 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 02, 2016 02:47 ET (06:47 GMT)
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