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CME and NEX Group agree
£3.9 billion acquisition
CME AND NEX GROUP REACH AGREEMENT ON ACQUISITION WHICH IS EXPECTED TO CLOSE IN THE SECOND HALF OF THIS YEAR.
U
S futures exchange operator CME and
UK FinTech powerhouse NEX Group have
reached an agreement which will see CME
acquire NEX for £3.9 billion.
The move will streamline access and new trad-
ing opportunities across spot and futures FX
products, and cash, repo and futures products in
US Treasuries, both firms said.
CME plans to combine NEX’s electronic FX and
fixed income execution platforms to improve
technology and reduce the amount of touch-
point clients need to trade certain instruments.
In addition, the union will boost post-trade and
data services for both companies.
Following completion of the buyout, expected
in the second half of this year, NEX CEO Michael
Spencer will join the CME board of directors and
remain with the combined business as a special
advisor, working to drive the integration and
creation of the new company.
“The combination of NEX and CME will be an in-
dustry-changing transaction,” Spencer comment-
ed. “Bringing together cash and futures products
and OTC services will be unique, offering clients
improved access to trading, greater financial
efficiencies and highly valuable data sets.
“The technology and innovation opportunities
will be diverse and extraordinary. Clients will
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be better served… CME’s decision to choose
London as its European headquarters is also
a signal of tremendous support for Britain’s
financial services sector.”
CME group chairman and CEO, Terry Duffy,
added that at a time when market participants
are seeking to lower trading costs and manage
risk more effectively, the acquisition will create
significant value for clients globally.
“Building on NEX’s deep roots in Europe and
Asia, and CME’s strong technology platform,
we will transform our international profile and
broaden our distribution network in spot and
futures FX products as well as cash, repo and
futures products in US Treasuries,” he said.
Fighting off the competition
Terms of the deal include a purchase price of
1,000p per share, 50% in cash and 50% in stock,
meaning NEX shareholders will receive 500p in
cash and 0.0444 shares of CME Group for each
NEX share. The total equity value stands at £3.9
billion, or $5.4 billion.
An analyst note from investment bank
Librium stated the offer, which is slightly above
what the market predicted it would be, was
an attempt to deter bids from other exchange
groups to acquire NEX Group.
“Following the confirmation that CME was
entertaining a bid for NEX we suggested a
take-out price of c.900p and in the event of a
competitive situation, which we viewed as likely,
then a price of +1000p was not unreasonable.
CME has this morning bid 1000p, clearly aiming
to deter any competitive threat,” Liberum said.
Another analyst note from Exane BNP Paribas
suggested CME could become a true competitor
in the OTC clearing space in Europe, where LCH
currently dominates.
“One might argue the combination of CME’s
clearing house and NEX’s TriOptima compres-
sion service might increase CME’s credibility as
a competitor in the OTC clearing market, though
we would expect TriOptima to remain open to
other CCPs,” Exane BNP Paribas commented.
“Focus seems to be on creating a futures,
cash, OTC franchise, helping users to lower cost
of trading. The release highlights the acquisition
as also expanding CME’s presence into EMEA
and APAC.”
News of the potential acquisition emerged in
March when NEX confirmed it had received a
preliminary approach from CME. Shares in NEX
surged 32% in early trading the morning of the
announcement.
Formerly ICAP, NEX Group underwent a
major rebrand in 2016 following Tullet Prebon’s
acquisition of ICAP’s global hybrid voice broking
business. The new business outlined a focus on
electronic markets and post-trade businesses
amid increasing regulatory pressures and migra-
tion towards electronic trading.
Industry heavyweight and NEX chief Spencer
commented at the time that the new busi-
ness would benefit and be well-placed amid
increased demand by regulators for electronic
trading and post-trade risk mitigation.
“NEX Group will be a fast moving, entrepre-
neurial pure electronic and post trade leader,
well positioned for growth. We wanted a name
to truly reflect this and which was tr