Goldman Sachs (GS) will launch a new private stock-trading venue, known as a “dark pool,” on Friday, that is run by exchange operator Nasdaq, according to a note to clients obtained by Reuters.
Goldman has been refreshing its trading technology to become more competitive in its electronic stock execution business, and hired Nasdaq last year to revamp its dark pool, known as Sigma X.
The new dark pool, called Sigma X2, will ramp up gradually, with two stock symbols trading on the first day, and the rest migrated over the course of a month as the old dark pool is phased out, according to the note sent to clients on Thursday.
A spokeswoman for the investment bank confirmed the contents of the note.
Nearly every major bank has a dark pool, a trading venue that does not have to provide information such as trade sizes or prices to the public prior to trades taking place, with the aim of getting large orders done with minimal price movement.
Dark pools have historically had less of a regulatory burden than public exchanges, but in recent years, they have come under increasing regulatory pressure, driving up legal, compliance, and technology costs for the firms that run them.
Sigma X2 will be the first dark pool hosted by Nasdaq, using the exchange operator’s technology, operations, and compliance monitoring.
Nasdaq said last year it was in negotiations with several brokers to host and run their dark pools, within its data center, under a white label product called “Ocean.”
Sigma X2 will differ Sigma X in that Goldman clients will eventually be able to interact with the bank’s principle trading flow if they choose, the note said.
The new trading venue will also allow clients that place orders a better choice of what type of counterparts they match up with inside the pool.
There are nearly 40 broker-run dark pools in the United States that compete with 13 public exchanges, including Nasdaq and Intercontinental Exchange Inc’s New York Stock Exchange.