Nasdaq buys eSpeed trading platform for $750 mn

Nasdaq OMX Group Inc, owner of the US' second-largest stock exchange, yesterday agreed to acquire eSpeed platform for trading of US treasuries from BGC Partners Inc, a global financial services company, for approximately $750 million in cash, as part of the group's diversification strategy.

The acquisition of eSpeed, which operates a fully executable platform for electronic trading in US treasuries, will give Nasdaq OMX a strong entry point in the electronic fixed income business – one of the largest and most liquid cash markets in the world, the company said in a statement.

The terms include a cash consideration of $750 million plus issue of approximately one million of Nasdaq OMX stock annually over 15 years that provide some tax benefits to the company.

Nasdaq OMX chief executive officer Bob Greifeld said, "We are building a diverse, customer-centric portfolio of corporate, trading, and technology and information solutions."

"We view the eSpeed platform as 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 per cent of its revenue is derived from fixed contracts and it has a long-standing presence on trading desks around the world,'' he further stated.

On completion of the transaction, eSpeed will become part of the Nasdaq OMX transaction service business, which offers market places in equities, derivatives, exchange traded products and commodities.

"US Treasuries represent a significant opportunity to expand Nasdaq OMX's trading business into a sizable new asset class that will provide our customers with access to a variety of instruments to better meet their trading strategies," executive vice president of transaction services Eric Noll said.

The US treasury volumes are one of the largest in the world with over $500 billion in daily trading volume and the company expects that to increase further as the economy picks up momentum.

eSpeed is well positioned, through the independent ownership of Nasdaq OMX, to benefit from the normalisation of the US government bond market and the cyclical drivers of volumes.

The acquisition diversifies Nasdaq OMX transaction services and allows the company to maximise new opportunities in the trading of fixed income securities around the globe, the company said.

The deal is expected to close in the mid-2013, subject to receipt of regulatory approvals.

The company plans to fund the acquisition with cash on hand and long-term debt.

The transaction is expected to be accretive to earnings within the first year after closing, excluding transaction-related costs, and to generate attractive returns on capital, the company said.