Nasdaq OMX acqusition targets US bond market
Greifeld: eSpeed will further Nasdaq OMX’s diversification strategy
Nasdaq OMX Group is to acquire bond platform eSpeed from BCG for $750 million in a move that highlights the increasing tendency for large stock exchanges to diversify as capital markets revenues from equity trading continue to decrease.
With the acquisition of eSpeed, which operates a central limit order book for US Treasury bonds, Nasdaq OMX is effectively buying an entry point into the fixed income markets. The purchase is based partly on the firm’s assumption that US Treasury volumes will increase, due to an improving macroeconomic environment, the continued electronification of the market and the resolution of fiscal uncertainty.
“US Treasuries represent a significant opportunity to expand Nasdaq OMX trading business into a sizable new asset classes that will provide our customers with access to a variety of instruments to better meet their trading strategies,” said Eric Noll, EVP, transaction services US and UK at Nasdaq OMX.
However, it is also based on market reality. Exchanges increasingly balance revenues from equity trading fees with revenues derived from technology, market data and other asset classes. Last year, capital markets business made up just 37% of the London Stock Exchange’s revenue, for example. Nasdaq OMX already operates markets for equities, derivatives, commodities and exchange traded funds.
“We are building a diverse, customer-centric portfolio of corporate, trading, technology and information solutions,” said Bob Greifeld, chief executive officer at Nasdaq OMX. “ We view the eSpeed platform as a compelling extension of Nasdaq OMX 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 longstanding presence on trading desks around the world.”
The Nasdaq OMX acquisition of eSpeed is expected to close in mid-2013, subject to regulatory approval in the US.
