Nasdaq OMX is to acquire the electronic eSpeed trading platform from BGC Partners for $750m in cash, but a share element will also be included pushing the eventual purchase price above $1bn as Nasdaq OMX says it will also issue around 15m common shares. The deal for eSpeed, which specialises in US treasuries trading, is subject to the usual regulatory approvals.
The eSpeed acquisition will be added to the Nasdaq OMX Transaction Services unit, which specialises in equities, commodities, derivatives, and exchange traded fund (ETF) products. The rationale behind the deal is obviously to expand Nasdaq OMX’s away from its core stock trading business which is declining and into new areas such as fixed income, although this too is not strong as it once was since the 2008 financial crisis. The exchange has also created a technology-focused business as part of its drive to diversify and was recently involved in the EuroCCP and EMCF merger as well as increasing its share in the LCH.Clearnet clearinghouse from 3.7% to 5% as part of the London Stock Exchange takeover of this institution.
The NLX European derivatives market from Nasdaq OMX, which was due to launch on 12 April, has been delayed until the summer, according to Bloomberg however, as the UK regulator wants more tests to be carried out on the LCH.Clearnet clearing system that the exchange intends to use, utilising its small stake in the firm.
According to Bob Greifeld, chief executive officer (CEO) of Nasdaq OMX, who will join the LCH.Clearnet board as part of that deal, says this latest eSpeed acquisition is, “a compelling extension of Nasdaq OMX's strategic direction as eSpeed is a major player in the US treasury market, has derivative-industry margins, 70% of its revenue is derived from fixed contracts and it has a long-standing presence on trading desks around the world."
The changing market conditions and regulatory environment will no doubt continue to drive such deals this year as exchanges, trading venues and market participants get used to having to clear derivatives trades effectively ‘on exchange’ via clearing houses and get used to increased transparency and reporting obligations post-crash.