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Exchange Group of the Year
Bats Global Markets
By almost every measure, it has been an exceptional year of the Kansas City-based exchange group. It successfully executed its IPO at the second time of asking in April 2016 and its stock price is up by more than a third since then. In August 2016, it furthered its expansion into FX asset classes by acquiring Javelin, a US swap execution facility. In Europe, it has remained the largest stock exchange by value of shares traded and it estimates that roughly 40% of all European equity trades are either reported or traded on the venue. Its major development in the year has been the launch of its own series of UK-focused benchmarks in June, creating a low-cost alternative to incumbent providers. Traditionally associated with HFT firms, the exchange has also been attempting to appeal to investors with a longer-term investment horizon with new block trading facilities, including a partnership with US-based block trading specialist Bids Trading.
The first time Carsten Kengeter addressed shareholders after it was confirmed that he was to become the new CEO of Deutsche Börse, he hailed the company as ‘the only European-based exchange organisation playing in the global league’. If anything, things could be about to get even more global given the planned merger with London Stock Exchange Group. The merger, if approved, would be the most transformative of any of the deals Kengeter has overseen in his 12 months as chief executive. In March 2016 he agreed to sell International Securities Exchange Holdings, which operates US equity options exchanges, to Nasdaq for $1.1 billion in cash. The sale formed part of Kengeter’s ‘Accelerate’ programme, under the agenda of improving capital allocation. As evidence by the LSE deal, it’s not just about selling. Kengeter’s reign has also seen the acquisition of electronic FX platform 360T, and the shares Deutsche Börse didn’t already own in index joint ventures Stoxx and Indexium. He is also highly focused on new technologies and has set up a new venture capital arm to invest in and partner with start-ups.
Unleashed after being spun out of Intercontinental Exchange, the self-styled first pan-European exchange has seen its shares double from their €20 pricing in the company’s June 2014 initial public offering. If there had been any doubts about Euronext’s ability to go it alone, the exchange proved its credentials by overcoming lighter volumes in the build-up to the UK’s vote to leave the EU in June. The second quarter was its most profitable quarter since becoming a listed company, with operating profit up by 12.6% to €73.9 million in the three months to the end of June against the corresponding period a year earlier. Like many of its rivals, Euronext is trying to make tough calls now to prepare for the future. The EU’s revised Markets in Financial Instruments Directive has prompted plans to launch a new service to attract more large equity trades, while the purchase of a 20% stake in equities clearer EuroCCP looks shrewd ahead of the expiry of its clearing contract with LCH.Clearnet SA.
Exchanges, clearing, data, listings – Intercontinental Exchange has them all. Jeffrey Sprecher, ICE’s CEO and chairman, showed a rare moment of restraint by decided against disrupting the merger between rivals LSE and Deutsche Börse. However, in light of Brexit it looks like an inspired move and Sprecher has since said that the prospect of Brexit dissuaded ICE from making a bid. Known for its knack for acquisition and integration, ICE has still had a busy year on the M&A front. In October 2015 it agreed to acquire the financial data provider Interactive Data for $5.3 billion. A month later, it agreed to buy the energy trading software provider Trayport from BGC Partners for $650 million in stock – a deal which is undergoing an in-depth investigation by The Competition and Markets Authority in the UK. Between them, the businesses added $260 million to ICE’s first-quarter net revenues, which surged 35% from the first quarter of 2015 to $1.2 billion.
London Stock Exchange Group
With a history that goes back to the 17th century, the LSE has in any given year the unenviable task of living up to – or surpassing – a long-lasting legacy. Even with the pressure that comes with being among the most venerable of financial institutions, the LSE has had a year that will be remembered. Its planned merger of equals with Frankfurt-based Deutsche Börse, should it clear regulatory hurdles, promises to go beyond the cosmetics of financial infrastructure and shake its foundations. While time-consuming, the merger hasn’t stopped innovation and progress within the existing LSE Group. The acquisition and subsequent integration of Frank Russell’s index business with FTSE has paid off. In the six months to the end of June the LSE’s information services business saw a 12% increase in revenue to £285.9 million. Elsewhere, newly launched products and services have included the LCH Spider rates portfolio margining service, and the Elite Club Deal online private placement platform for SMEs, while CurveGlobal, a derivative trading venture, is set for a third-quarter birth.