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BMO has been expanding its U.S. capital market business under chief executive Darryl White.

Graham Hughes/The Canadian Press

The technology race between Canada’s big banks is heating up, with Bank of Montreal in talks to acquire U.S. trading software company Clearpool Group Inc. for approximately $100-million, according to multiple sources familiar with the transaction.

Clearpool builds algorithm-based trading programs for banks and investment dealers, and the capital markets arm at BMO struck a partnership with the privately owned New York-based company in 2018.

According to sources familiar with the talks, BMO is now planning to acquire Clearpool in a transaction that will see the company’s three founders paid out over a period of several years, to keep them tied to the Canadian bank. The Globe and Mail is not identifying the sources because they are not authorized to speak publicly about the deal.

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Clearpool was founded in 2014 and has approximately 120 institutional clients. The company claims that its software supports approximately 2 per cent of daily U.S. stock trading, and the company also operates in Canada and Europe. On Tuesday, spokespersons for BMO and Clearpool declined to comment on a possible transaction.

If the acquisition does happen, it will be the latest in a string of technology-focused ventures by Canadian banks. Two years ago, Toronto-Dominion Bank turned heads by acquiring Toronto-based artificial intelligence startup Layer 6 for approximately $100-million. Last July, Royal Bank of Canada acquired WayPay, a cloud-based payments fintech company based in Burlington, Ont. Canada’s largest banks each spend more than $3-billion annually on technology.

BMO has been expanding its U.S. capital market business under chief executive Darryl White. Last May, the bank acquired KGS-Alpha Capital Markets, a New York-based fixed-income dealer specializing in U.S. mortgage-backed and asset-backed securities.

When BMO announced its partnership with Clearpool in April, 2018, Aine O’Flynn, BMO’s head of global equity products, said in a news release: “Electronic trading is a key strategic priority for us and this partnership reinforces BMO’s commitment to the space.” In the same release, Clearpool founder and CEO Joe Wald said: “Expanding into Canada and Europe is part of our global commitment to develop electronic trading solutions that bring forth transparency to promote fair and equitable markets.”

Clearpool obtained approval to sell its products in Canada last year, and rang the opening bell on the Toronto Stock Exchange last May. In July, the company licensed software to its first European bank.

Mr. Wald previously founded an electronic stock-trading platform called EdgeTrade Inc., then sold it to Knight Capital Group in 2008. The other founders, Clearpool’s president and chief technology officer, also have extensive experience in trading, with backgrounds that include stints at Knight Capital, technology companies and the New York Stock Exchange.

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