(Corrects spelling of Cowen in headline)
By John McCrank
NEW YORK, June 1 Financial services company
Cowen Inc closed its acquisition of Convergex on
Thursday and said it will shutter a key part of the off-exchange
trading platform, Millennium, it acquired with the brokerage.
Millennium, also known as a "dark pool," will stop offering
continuous trading on June 23.
The private electronic trading venue is one of more than 30
broker-run dark pools, also known as alternative trading systems
(ATSs), in the United States that compete with 13 public stock
exchanges, including the Nasdaq and the New York Stock
That fragmentation, which can make it more challenging to
get trades done, has been a source of frustration for many of
Cowen's customers, Jeffrey Solomon, president of the company,
said in a note to clients.
"By discontinuing Millennium ATS's midpoint matching engine,
Cowen has the ability to proactively reduce fragmentation –
something we and many of our clients feel will improve U.S.
equity market structure," he said.
Like many other dark pools, Millennium matches trades at the
midpoint of the best bid and offer shown on public exchanges,
giving the potential for better prices.
Millennium was the 16th-largest U.S. equities dark pool out
of 31, according to the latest statistics from the Financial
Industry Regulatory Authority, matching more than 38 million
shares in the week of May 8.
Dark pools are more lightly regulated than exchanges and do
not have to provide information such as trade sizes or prices to
the public prior to trades taking place.
The electronic trading platforms were originally used to get
large orders done with minimal price movement, but they gained
popularity for smaller orders as well, in part because their
fees are generally lower than those at exchanges.
As their usage has increased, so too has the scrutiny of
regulators, which have brought enforcement actions against
several dark pools in recent years for fraud and conflicts of
interest in order routing.
Cowen, which has never operated a trading venue, said it
would continue to operate a part of Millennium that executes
pre-matched orders and reports the trades on behalf of exchanges
Millennium was built and is hosted by Thesys Technologies
LLC, on behalf of Convergex. Thesys recently won the contract to
build a build and run a massive stock and options trading
database aimed at helping regulators police the increasingly
fast, fragmented and complex markets.
(Reporting by John McCrank; Editing by Steve Orlofsky)