Derivative giant in the making- ICE, NDAQ, NYX, & DB1

IntercontinentalExchange Inc (NYSE:ICE) will pay $750 million in termination fee for the $8.2 billion takeover bid, for the New York Stock Exchange in case the former fails to get antitrust clearance. In its regulatory filing made on Friday it said NYSE could take a back foot on the deal for $300 million in case a more lucrative bid is received. The company’s joint bids with NASDAQ OMX Group Inc (NASDQA:NDAQ) targeting NYSE and its acquisition deal by Deutsche Boerse  last year both were rejected under antitrust law.

In a side deal the NYSE’s privately held, Liffe financial derivatives business will be allowed to be transact its trades through the Intercontinental Exchange Inc (NYSE: ICE) clearing regardless of finalization of the deal, something the analysts term as the additional “break-up fee”.

Few industry experts anticipate a competitive bid from the CME Group  however many contend that the break-up fees might make the target less attractive for CME which is known to restrain from larger bids. Duncan Niederauer CEO also confirmed that the NYSE would not accept a deal unless it passes regulatory requirements.

According to a Berenberg Bank analyst, the deal will conceive “a bigger and more aggressive competitor,” for the Deutsche Boerse. The newly formed exchange group worth $15.2 billion would rank third worldwide after The Hong Kong Stock exchange with $19.5 billion market value and the $17.5 million worth CME group in second place. Jeff Sprecher (ICE’s CEO) will be CEO of the combined group while Duncan Niederauer (Euronxt CEO) will be its president.

Intercontinentalexchange Inc (NYSE:ICE) will gain an advantage in Europe’s lucrative financial derivatives market as Europe’s second largest futures market NYSE Liffe will come under its control. This will make the giant march ahead of the American rivals like CME and NASDAQ who are already contemplating to launch their own exchanges next year.

Amid the latest banking sector regulatory reformed for vigilant monitoring of risk on trading positions, exchanges will be pushed to transact financial derivatives trades through clearing houses. The New York Stock Exchange and the London based Liffe the star performer of the NYSE Euronext (NYSE:NYX). Declining trading profits and the emergence of alternative trading places have made stock markets a less attractive target for INTERCONTINENTALEXCHANGE INC (NYSE:ICE).The company plans to sell of Euronext European stock market in a public offering however it denied speculations of divesting from the Wall Street trading floor. The NYSE annual operating income was $473 million during 2011 and $861 million revenues compared to $533 million profits on $1.3 billion revenues from equities business.

Intercontinentalexchange Inc (NYSE: ICE) was launched 12 years ago as an online energy trading platform and later acquired the International Petroleum Exchange of London in 2001, the New York Board of Trade and many recent smaller deals on Brazilian clearing house and climate derivatives exchange.

The shares of intercontinental Exchange Inc. (NYSE:ICE) were up 2.96% to $126.25. The shares of NYSE Euronext(NYSE:NYX) traded for $32.25. The shares of NASDAQ OMX Group Inc.(NASDAQ:NDAQ) were down 2.37% to close at $25.49.The shares of Deutsche Boerse AG (ETR:DB1) were up by 0.29% to close at 46.51 Euros.

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Published by Benjamin Roussey

Benjamin Roussey is from Sacramento, California. He has two master’s degrees and served four years in the U.S. Navy. His bachelor’s degree is from CSUS (1999) where he was on a baseball pitching scholarship. His second master’s degree is an MBA in Global Management from the University of Phoenix (2006). He has worked for small businesses, public agencies, and large corporations. He has lived in Korea and Saudi Arabia where he was an ESL instructor. Benjamin spends his time in between Northern California and Cabo San Lucas, Mexico, committing himself to his craft of freelance and website writing.