Nasdaq Inc. agreed to buy off-exchange stock-trading venue LeveL Markets to expand its role in the equity market, according to people familiar with the matter.
The US exchange operator is purchasing all equity interests in the alternative-trading system also known as a dark pool, the people said, asking not to be identified discussing private information. Terms of the deal couldn’t be learned.
A representative for Nasdaq declined to comment.
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The move gives one of largest US exchange operators access to a growing segment of the equities market happening off-exchange. Alternative-trading systems offer an anonymous way to process trades outside of public exchange venues. Activity on those platforms has been growing as trading has shifted away from places such as Nasdaq and the New York Stock Exchange.
Trading that happens internally at major firms or on the alternative platforms represented 49.9% of traded volume in July, according to data compiled by Bloomberg. Last year was the first time on record that hidden trades made up more than half of all volume.
Venues such as LeveL use different mechanisms to match buyers and sellers without the desired price being displayed on a public exchange, or automated auctions where parties express the value they are willing to buy or sell stocks for. Using off-exchange platforms helps institutional investors limit information leaking to the market and adversely affecting prices.
Unlike public exchanges, dark pools aren’t required to regularly disclose the same information about their trading systems. Most are run by broker-dealers, which are overseen by the Financial Industry Regulatory Authority. They buy and sell assets on behalf of customers as well as trade for their own accounts. LeveL launched its alternative-trading system in 2006, backed by a group of banks.
Nasdaq, the second-largest US stock exchange, made a strategic investment in Boston-based LeveL in 2021, as activity was moving away from exchanges and onto dark pools. In acquiring the initial “significant minority stake,” it joined LeveL institutional investors including Bank of America Corp., Fidelity Investments and Citigroup Inc.
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