Sources have confirmed that block trading venue operator Aritas is in the process of closing its US business, following the sale of a number of its patents to agency broker ITG.
ITG sealed the purchase of 21 US and corresponding foreign patents from Aritas on 30 May. The patents relate to block trading functionality, crossing networks, front-end trading systems and bring the total number of ITG’s patents to 48.
The deal does not include non-patent assets or personnel of Aritas and its affiliated businesses.
The deal is unlikely to have much impact on ITG’s POSIT block crossing network, with Bob Gasser, president and CEO of ITG stating that the acquisition “further protects the firm’s competitive position”.
With the exit of Aritas, ITG’s POSIT and Liquidnet are the only significant block crossing venues in the US.
According to data from US boutique broker Rosenblatt’s Let There Be Light, a monthly dark pool trader, POSIT accounted for around 0.68% of consolidated US equity volumes in March, compared to 0.22% for Liquidnet’s negotiated service. ITG had an average trade size of 3,500 shares in March, compared to 44,817 for Liquidnet.
Aritas, was rebranded from its former identity Pipeline after allegations from the Securities and Exchange Commission in October 2011 concerning improper disclosure of how trades were executed in its block crossing network.
The firm was fined US$1 million after the SEC found that the firm failed to tell clients that the vast majority of orders executed in its dark pool were filled by Milstream Strategy Group, an entity trading entirely owned and funded by Pipeline and managed by former Pipeline CEO Fred Federspiel between 2004 and 2006.
Pipeline then overhauled its senior management, with the appointment of former Liquidnet and ITG director Jay Biancamano, and renamed as Aritas, with the aim of repositioning its business as a technology company.
Aritas’ main buy-side trading tools – Alpha Pro and the Algorithmic Switching Engine, which jointly use real-time predictive analytics and market signals to recommend trading strategies and execution algorithms – were subsequently sold to execution management system provider Portware in early March.
The firm’s European operations were also wound down in late April, having seen little trading on its system since its launch in May 2011.