Cboe Global Markets agrees to acquire EuroCCP

US-based exchange holding company, Cboe Global Markets, has entered into a definitive agreement to acquire the pan-European equities clearing house, EuroCCP.

Cboe’s ownership of EuroCCP is expected to provide opportunity to pursue the development of equity derivatives trading and clearing capabilities in the region, subject to regulatory approvals.

The two companies are closely aligned on a vision to further expand the benefits of EuroCCP’s open-access model serving other exchanges and trading venues.

The deal is expected to close in the first half of 2020.

EuroCCP currently clears trades for 39 trading venues, which represent close to 95% of Europe’s equity landscape, making it the most connected equity central counterparty (CCP) in the region. It clears on average between four to five million trade sides daily, totalling €30 to €40 billion in value, and provides clearing members with easy access and the ability to maximize operational efficiency and netting opportunities while reducing risk and cost.

Cboe sees an opportunity to further grow this business by capitalising on the strength of its pan-European network.

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Ed Tilly, chairman, president and CEO of Cboe Global Markets says: “Cboe’s planned acquisition of a leading equities clearing house in Europe is an important step in our growth strategy for the region. We believe ownership of EuroCCP will enhance our current European equities business, while providing opportunities to potentially diversify our business, including trading and clearing derivatives, in the future. We look forward to officially welcoming the EuroCCP team to Cboe Global Markets.”

“Cboe is a staunch advocate of open access and interoperability, values which EuroCCP has long promoted, with an established track record of servicing clients globally and providing innovative products across numerous asset classes. We believe this transaction positions EuroCCP for continued success and we look forward to becoming part of the Cboe group. EuroCCP remains committed to offering a best-in-class service with leading client satisfaction,” says Cécile Nagel, CEO of EuroCCP.

While the company expects its plans to acquire EuroCCP and pursue equity derivatives trading and clearing in Europe to generate positive financial returns longer-term, these initiatives are expected to be dilutive to earnings over the next three to four years.

The potential impact to earnings per share is currently expected to be in the range of $0.08 to $0.10 for 2020 and 2021.

The estimated earnings per share impact is as follows: (1) a portion reflects the potential acquisition of EuroCCP, representing about half of the estimated earnings per share impact in 2020 and neutral to slightly positive estimated earnings per share impact in 2021 and (2) the remaining portion in 2020 and 2021 primarily reflects Cboe’s planned investment in building out its European derivatives clearing and trading business.

This investment is expected to have the greatest negative earnings impact in the first few years as the company ramps up its European derivatives trading and clearing and builds sufficient scale. The potential expense impact from these initiatives is not reflected in the company’s 2020 expense guidance that was reaffirmed on 1 November 2019.