Nasdaq OMX Group, Inc. is expanding its footprint in the fixed-income trading business with the acquisition of eSpeed.
Nasdaq has entered into an agreement with BGC Partners, Inc. to acquire the eSpeed platform for US$750 million in cash plus contingent stock issuances over the next 15 years (Nasdaq expects to issue approximately 1 million shares annually over 15 years). The transaction is expected to close in mid- 2013, subject to regulatory approvals.
The exchange says that the acquisition of eSpeed, which operates a fully executable central limit order book for electronic trading in U.S. Treasuries, will give it a strong entry point in the electronic fixed income business. The eSpeed platform will become part of the Nasdaq OMX Transaction Services business, which offers marketplaces in equities, derivatives, exchange traded products and commodities.
Nasdaq OMX says it expects U.S. Treasury volumes, which is already one of the largest markets in the world, to continue to increase, as core drivers gain momentum and economic headwinds subside. The stability in the issuance of new Treasuries, the continued electronification of the U.S. Treasury market, and the resolution of fiscal uncertainty, will drive volume growth, it suggests.
The transaction is expected to be accretive to earnings within the first 12 months after closing, excluding transaction-related costs, and to generate attractive returns on capital.
“We are building a diverse, customer-centric portfolio of corporate, trading, technology and information solutions,” said Bob Greifeld, CEO of Nasdaq OMX. “We view the eSpeed platform as a compelling extension of Nasdaq OMX’s strategic direction as eSpeed is a major player in the U.S. 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 acquisition furthers our stated diversification strategy, and strengthens our commitment to deliver significant value to shareholders.”