ICE’s swoop creates big player in derivatives

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IntercontinentalExchange’s $8.2bn takeover of New York Stock Exchange owner NYSE Euronext allows it to tap into a dramatic expansion of demand for clearing financial derivatives expected next year.

The deal gives commodities and energy bourse ICE control of NYSE Liffe, Europe’s second-largest derivatives exchange, helping it to compete against larger US rival CME Group, owner of the Chicago Board of Trade

Unlike stock trading, derivatives remain highly profitable for the exchanges, and new rules next year will sharply increase demand for clearing over-the-counter contracts.

NYSE Euronext CEO Duncan Niederauer had long felt that his shareholders did not appreciate the true value of the London-based futures and options exchange, and had talked to bankers about how to improve NYSE’s stock price, a source said.

NYSE made an operating income of $473m from Liffe in 2011 on revenues of $861m compared to an income of $533m on revenues of $1.3bn from its equities business.

The deal threatens to further reduce the clout of the New York Stock Exchange. While ‘Big Board’, as it is affectionately known, has stood for 200 years as an iconic symbol of US capitalism, it is almost an afterthought in the takeover.

The stock market businesses are less valuable to ICE. The company said it will try to spin off the Euronext European stock market businesses in a public offering, generating speculation it may also have little interest in the NYSE trading floor.