ICE exchange to buy IDC for $5.2bn (regulatory play around quality reference/market data?)


Interesting to see The ICE exchange is to buy IDC for $5.2bln.

According to ICE Chairman and CEO Jeffrey Sprecher, the acquisition:

“builds on ICE’s global market data growth strategy by expanding the markets served, adding technology platforms and increasing new data and valuation services

…. with IDC as the cornerstone in the next phase of extending our services, we will build on our track record of solid execution on integration and innovation by focusing on the needs of our customers in the evolving data services marketplace.”

IDC’s clients include banks and buyside firms such as Municipal funds, asset managers, hedge funds.

ICE’s data business covers nine asset classes across the eleven exchanges and seven clearing houses it operates, including the NYSE Group and ICE Futures exchanges. ICE offers benchmark and valuation services for Libor, exchange traded funds, a range of financial derivatives, and clearing house positions.

The combined company will offer customers efficiencies in accessing data on an integrated platform while serving the growing demand for data, analysis, valuation and connectivity globally. ICE has been steadily growing its data and valuation services, and last year buying SuperDerivatives, a leading provider of risk analytics, market data and valuation services for $350mln.

The way I see it, regulations such as the MiFID II with the emphasis on demonstrating BestEx, and enhanced pre and post trade transparency, are driving demand for higher quality market data and independent benchmark valuation and reference services. So, it seems that The ICE exchange is on a win-win here. Not only do they win in terms of the regulatory push for more products to trade on exchanges and regulated markets, they also win through their vertically integrated clearing houses, and now they will win through increased demand for quality market data!

The other opportunity here according to a WSJ article is around corporate bonds, which outside the few liquid bonds that trade, are hard to value and price. IDC is a major provider of bond analytics and this could enable ICE to profit in two ways: by launching its own corporate bond-trading platform and selling its data to other emerging trading venues, in addition to the firm’s current roster of banking, asset management and other clients.

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