2019 was a remarkably busy year for mergers and acquisitions in the capital markets sector of the global financial services industry. Several leading exchanges announced major acquisitions, the discount brokerage industry in the U.S. saw a blockbuster merger between Charles Schwab and TD Ameritrade, and there were numerous deals among the many technology providers that support banks, brokers, and other market participants.
MarketVoice identified more than 40 transactions announced last year that will impact participants in the global derivatives markets. In some cases, the transactions involved exchanges or technology companies that are directly engaged in the trading of derivatives. In other cases, the transactions were not focused on derivatives but had an impact on the broader ecosystem of data and technology providers that support the global exchange-traded markets.
Some of the deals came with very large price tags, notably the London Stock Exchange Group's $27 billion acquisition of Refinitiv and Charles Schwab's $26 billion acquisition of TD Ameritrade. Most were much smaller, at least in dollar terms. But looking beyond the price tags, the transactions announced in 2019 speak to the different strategies among marketplace leaders and the underlying trends in trading technology.
Exchanges were the biggest players in the M&A transactions announced in 2019. Fifteen of the 42 transactions tracked by MarketVoice involved exchanges and other trading venues. But the types of deals varied considerably.
At one extreme was the LSEG purchase of Refinitiv, the financial data and analytics company that was spun out of Thomson Reuters in 2018. The deal was not only the biggest of the year in terms of value, it also showed how much the leading exchanges are moving beyond their traditional trade matching and clearing functions. Refinitiv has a stake in the trading venue business--it owns 100% of FXall and a majority stake in Tradeweb--but most of its revenues come from data and analytics. This deal was the first big move by David Schwimmer, the former Goldman Sachs investment banker who was appointed CEO in April 2018, and a clear signal that he sees data services as the path to growth for LSEG.
At the other extreme were Cboe and Euronext, both of which made relatively conventional acquisitions within the market infrastructure business. Cboe bought EuroCCP, which clears trades for a large number of trading venues for European stocks, and announced that it plans to use this clearinghouse as the steppingstone for extending its equity derivatives business into Europe. Euronext made two deals in Scandinavia, buying 100% of Oslo Bors, the Norwegian stock exchange, and 66% of Nord Pool, the region's main market for physical power.
Deutsche Börse made one big deal, the $850 million acquisition of Axioma, a provider of cloud-based portfolio and risk management software to investment managers. Two things made the deal particularly noteworthy: the internal restructuring that combined Axioma with the German market operator's index business, and the involvement of General Atlantic, the U.S. private equity company, which invested $715 million in the new business unit. As with LSE, the deal sent a clear signal about the value that exchange leaders see in the data services adjacent to the traditional trade matching business.
Nasdaq completed two deals that symbolize the company's strategy. In January, it led a funding round for Symbiont, a blockchain startup focused on the securities industry, and in December it sold a large chunk of its commodity futures and options business to the European Energy Exchange. The two deals were the latest moves by Adena Friedman, the exchange's chief executive, to reallocate resources into market technology and information services, which she views as offering higher potential for growth.
As for ICE, one of the most active dealmakers in previous years, 2019 was relatively quiet. The most notable deal in the capital markets space was the acquisition of a set of indices from BAML that track fixed income volatility, which turned out to be a very timely bet on increased volatility.
Meanwhile, in the world of trading technology, several deals were announced by companies eager to acquire cutting-edge technology for low-latency trading. Two technology companies based in California, Cisco and Xilinx, stepped into the capital markets space through the purchase of SolarFlare and Exablaze, much smaller companies that specialize in providing FPGA-based hardware designed for ultra-low latency trading. Another example of this trend was the agreement announced by Pico, a trading technology company backed by several major investment banks, to acquire Corvil, which specializes in the real-time monitoring of network performance and the flow of order messages to and from exchanges.
Amid all this deal-making, the banks and brokers were relatively quiet. In fact, most of the deals announced by these firms in 2019 were actually retrenchments. Barclays got out of the automated options market making business, transferring the business and 40 employees to GTS, a tech-savvy market maker based in New York. And Deutsche Bank exited prime brokerage, part of the down-sizing of its investment bank, by transferring the business to BNP Paribas.
On the other hand, some banks and brokers did show an appetite for growth through deal-making. BNP Paribas bought a minority stake in Allfunds, a wealth management platform based in Spain, to cement a strategic partnership in the custodial and fund services business. And Charles Schwab swooped in to buy TD Ameritrade, taking advantage of its competitor's struggles with the adoption of zero commission trading. Although the two brokers focus primarily on stock trading, the deal also brings together two of the biggest players in retail trading of equity options, an important source of flow for the exchanges and market makers in that sector of the derivatives markets.
January
1/23 Nasdaq Ventures, the venture capital arm of Nasdaq, leads a $20 million funding round for Symbiont, a fintech company specializing in the development of smart contracts based on distributed ledger technology. Nasdaq says the investment will pave the way for integrating Symbiont into the Nasdaq Financial Framework, its open platform for market infrastructure technology.
1/30 London Stock Exchange Group buys a 4.92% stake in Euroclear, a key part of the infrastructure for European financial markets, for 278.5 million euros. LSEG says the investment will strengthen their operational and commercial relationship and provide further opportunities for "commercial collaboration and product development." Euroclear is the largest securities depository in Europe. As part of the deal, LSEG will gain a seat on Euroclear's board of directors.
March
3/27 Singapore Exchange buys a 20% stake in BidFX, a subsidiary of technology company TradingScreen, for $25 million. BidFX provides hedge funds, banks and asset managers with a front-end trading platform and acts as a liquidity aggregator for spot, swaps and forwards for G10 and Asian currencies. The deal includes an option to buy a controlling interest in BidFX and a connection between the trading platform and the SGX clearinghouse.
3/28 Japan Exchange Group, the parent of the Tokyo Stock Exchange and the Osaka Derivatives Exchange, announces a preliminary agreement to buy the Tokyo Commodity Exchange, Japan's leading commodity futures and options exchange. The two companies finalize the merger agreement in July and complete the transaction in October.
April
4/2 Broadway Technology, a New York-based provider of an end-to-end trading platform widely used by banks for fixed income and FX trading, acquires Barracuda FX, an FX order management software provider based in Ireland. Broadway executives say the deal will allow the company to expand its product suite and deliver its solutions across "more parts of the investment lifecycle."
4/8 Tradeweb Markets, an electronic marketplace for rates, credit and other financial instruments, raises $1.16 billion in an initial public offering. The company says the proceeds will be used to buy shares held by eight of the 11 banks that own stakes in the company. The majority of the company's equity will continue to be owned by Refinitiv.
4/9 Deutsche Börse announces agreement to buy Axioma, a provider of portfolio and risk management services for the buy-side, for 850 million euros. The German markets operator finances the deal by combining Axioma with its index business and selling a stake in the combined business unit to General Atlantic, a private equity firm with a long and successful record in the financial services sector.
4/15 Moody’s Corporation buys a majority stake in Vigeo Eiris, a research, data, and assessments firm based in Paris that specializes in helping investors and issuers assess environmental, social and governance factors. Moody's said the deal will support the company's efforts to leverage the rapid growth in ESG as an investment theme.
4/24 Xilinx, a technology company specializing in programmable logic devices such as FPGAs, announces an agreement to buy Solarflare Communications, a company specializing in facilitating low-latency network technology for clients such as banks and trading firms. The two California-based companies plan to combine their services to accelerate network, data storage, and compute functions for their clients.
May
5/22 GTS, a leading electronic market maker, completes its acquisition of two automated market-making businesses from Cantor Fitzgerald. As part of the deal, 30 Cantor employees move to GTS. The market-making businesses cover exchange-traded funds and wholesale OTC equities.
5/23 Refinitiv signs an agreement to acquire AlphaDesk, a cloud-based order management system that offers order and portfolio management, risk, and compliance solutions for buy-side clients. Refinitiv executives say they plan to integrate AlphaDesk with the company's trading workflow solutions.
5/31 IRESS, a financial services technology company based in Australia, buys QuantHouse, a provider of market data and trading infrastructure based in France, for €38.9 million ($43 million). QuantHouse specializes in providing ultra-low latency market data, tools for algorithmic trading, proximity hosting and order routing. IRESS says the deal will expand the geographical coverage of its market data business.
June
6/18 Euronext completes purchase of Oslo Børs, the latest in a series of acquisitions of smaller European exchanges, after winning a bidding war with Nasdaq. Euronext executives say the Norse exchange will serve as its "development hub and launchpad for expansion" in the Nordics. They point in particular to its strengths in serving small and medium-sized companies and its ownership of VPS, the Norwegian central securities depository.
6/19 First Derivatives, a U.K. provider of trading and risk management software systems, completes the final stage of its multi-year acquisition of Kx Systems, a California database company specializing in low-latency data processing. Kx is used by banks for time-series analytics on market data. First Derivatives bought a controlling stake in October 2014.
July
7/9 Piper Jaffray, an investment bank based in Minneapolis with strengths in healthcare, consumer and technology sectors, announces a $485 million acquisition of Sandler O’Neill + Partners, an investment banking boutique with a strong franchise in the financial services sector.
7/9 Pico, a provider of technology infrastructure for trading, announces an agreement to acquire Corvil, which specializes in providing real-time analytics and machine intelligence for measuring the performance of financial markets infrastructure.
7/24 Moody’s Corporation buys a majority stake in Four Twenty Seven, a California-based provider of data, intelligence, and analysis related to physical climate risks. The deal is part of a larger effort by Moody's to fill out its climate risk assessment capabilities.
August
8/1 London Stock Exchange Group announces an agreement to acquire Refinitiv, the data and analytics company spun out of Thomson Reuters in 2018, for $27 billion. Under the terms of the deal, Refinitiv’s shareholders, a consortium of investment funds affiliated with Blackstone as well as Thomson Reuters, will retain a 37% economic interest in LSEG. The deal was interrupted in September when Hong Kong Exchanges and Clearing made an offer to buy LSE for $39 billion, but HKEX withdrew after failing to win the support of LSE management and investors.
8/5 Intercontinental Exchange agrees to acquire a set of indices that track volatility in fixed income markets from Bank of America. The indices include the well-known MOVE index, which stands for the Merrill Lynch Option Volatility Estimate. ICE says the indices will be added to the more than 5,000 indices provided by its data services business.
8/13 MarketAxess Holdings announces an agreement to acquire LiquidityEdge, which operates an electronic marketplace for U.S. Treasuries, for $150 million. MarketAxess says the deal will complement its strength in the electronic trading of corporate bonds.
8/13 Bloomberg announces the acquisition of RegTek.Solutions, a London-based fintech company founded in 2017 that provides regulatory reporting solutions to banks and other capital markets participants. The company will be integrated with Bloomberg’s Regulatory Reporting Hub as well as its enterprise data management and trading systems.
8/26 Verisk Analytics, a provider of data analytics with roots in the insurance industry, agrees to buy Genscape, a company that provides real-time data and analytics to the energy industry, for $360 million. Genscape gathers data from the world's largest private network of in-field monitors as well as satellite reconnaissance and maritime freight tracking. Verisk plans to combine Genscape with Wood Mackenzie, the commodity market intelligence company that Verisk bought in 2015.
September
9/9 Peak6, the Chicago-based investment and technology firm, buys Electronic Transaction Clearing, a provider of custodial, clearing and settlement solutions to broker-dealers, proprietary trading firms and others in the U.S. equities markets. Peak6 says ETC will complement its subsidiary Apex Clearing, which provides similar services for the retail securities marketplace.
9/18 Bursa Malaysia and CME Group announce that the two exchanges will unwind the cross-shareholding put in place in 2009. The Malaysian exchange said will buy back the 25% stake in its derivatives exchange that it sold to CME in 2009 and sell its stake in CME. The Malaysian exchange also said that CME agreed to continue hosting Bursa Malaysia's futures and options, including its palm oil contracts, on CME's electronic trading platform until 2025.
9/23 Deutsche Bank finalizes an agreement with BNP Paribas to transfer its prime finance and electronic equity business to the French bank, including the transfer of technology and staff. The transaction is part of the German bank's plan to "significantly downsize" its investment bank and reduce costs by 25% over the next three years.
9/27 AB Max Sievert, a Swedish investment company, buys a minority stake in Scila, a surveillance and risk technology provider based in Sweden, from Nasdaq. Nasdaq inherited the shares through its acquisition of Cinnober, a Swedish technology company, in 2018.
October
10/1 Broadridge Financial Solutions buys Shadow Financial Systems, a provider of post-trade solutions for listed derivatives and cryptocurrencies. Broadridge says the acquisition will add a "market-ready solution" for exchanges, brokers, and proprietary trading firms.
10/2 MSCI buys Carbon Delta, a Zurich-based environmental fintech and data analytics firm founded in 2015 that specializes in climate change scenario analysis. MSCI says the deal will allow it to create an "extensive climate risk assessment and reporting offering" for institutional investors.
10/9 Tradegate Exchange, a German stock exchange majority owned by Deutsche Börse, completes an agreement to buy Börse Berlin, the parent of the Berlin Stock Exchange. The deal also includes Börse Berlin's stake in Equiduct, a trading venue based in London that provides a single point of access to stocks and exchange-traded funds traded on other trading venues in Europe.
10/21 BNP Paribas buys 22.5% of Allfunds, a wealth management platform based in Spain that has more than 500 billion euros in assets under administration, and forms a "strategic partnership" with BNP Paribas Securities Services, its custodial and fund services business. Allfunds is owned by Hellman & Friedman, the U.S. private equity firm, and GIC, Singapore's sovereign wealth fund.
10/28 Moody’s Corporation announces an agreement to buy a minority stake in SynTao Green Finance, an ESG data and analytics agency based in China. STGF’s data covers publicly listed Chinese companies, bond issuers and macro ESG development trends. This is the third ESG-related deal announced by Moody's in 2019.
November
11/6 Miami International Holdings, the parent company of three U.S. options exchanges, buys a controlling stake in the Bermuda Stock Exchange, an offshore market that lists and trades equities, debt issues and other instruments. MIH executives say the deal will allow the company to leverage the government of Bermuda's supportive approach to digital assets.
11/21 S&P Global announces an agreement to acquire an ESG ratings business from RobecoSAM, an affiliate of the Dutch investment manager Robeco. The acquisition includes the company's SAM Corporate Sustainability Assessment, an annual evaluation of sustainability practices at more than 4,700 companies.
11/25 The Charles Schwab Corporation announces an agreement to acquire TD Ameritrade, one of its primary rivals in the retail brokerage industry, for $26 billion. When the deal closes, which is expected in the second half of 2020, the combined firm will have 24 million client accounts with more than $5 trillion in client assets.
11/27 Nasdaq sells its U.S. commodity futures and options business to the EEX Group, the commodity arm of Deutsche Börse. The deal includes the transfer of open interest in freight futures to EEX, which will be combined with the freight futures business that it has developed through deals with LCH in 2017 and ClearTrade in 2016. The deal also includes the transfer of open interest in U.S. power futures to Nodal Exchange, the Virginia-based exchange and clearinghouse that EEX acquired in 2017.
11/28 VoxSmart, a London-based fintech company that specializes in surveillance technology for mobile communications, buys the trading surveillance division of Fonetic, a company based in Madrid. The business includes multilingual voice and electronic communications surveillance and intelligence tools as well as a trade reconstruction engine. VoxSmart says the deal will meet market demand for greater consolidation of the regulatory technology landscape.
December
12/4 Euronext buys 66% of Nord Pool, one of the leading physical power markets in Europe. The Oslo-based company offers trading, clearing, settlement and associated services for intraday and day-ahead physical markets in the Nordic and Baltic regions.
12/10 Cboe Global Markets takes control of EuroCCP, a clearinghouse based in Amsterdam, through an agreement to buy the 80% it does not already own. Cboe executives say they plan to use the clearinghouse, which currently clears equity trades for 39 venues in Europe, as a stepping stone into the European equity derivatives market. Cboe bought the company from four other shareholders: ABN Amro Clearing Bank, DTCC, Euronext and Nasdaq.
12/11 GTS, a leading electronic market maker, announces an agreement with Barclays to buy its equity options market making business and onboard 40 of its personnel. GTS says the Barclays unit quotes prices for more than 735,000 securities across 13 exchanges and trades approximately 2% of all exchange-traded equity options volume in the U.S.
12/11 Miami International Holdings agrees to buy a minority stake in MidChains, a digital asset trading platform based in Abu Dhabi that is scheduled to launch in mid-2020. The two companies say they will pursue joint technology licensing and product listing opportunities.
12/16 Cisco agrees to acquire Exablaze, an Australian firm that builds ultra-low latency networking solutions that was spun out of a trading firm in 2013. Cisco officials say the addition of Exablaze's FPGA devices and applications to its product portfolio will strengthen the company's offerings to banks and high-frequency trading firms.
12/19 Crisil, a subsidiary of S&P Global, agrees to buy Greenwich Associates, a consulting firm that provides market intelligence and advisory services to the financial services industry.
