IntercontinentalExchange Group Inc. (ICE) remains committed to spinning off its European equity market division, Euronext, through an initial public offering, according to Chief Executive Officer Jeff Sprecher.
He took ownership of Euronext and Liffe, a London-based futures market, last week by acquiring NYSE Euronext. Because Euronext and Liffe are regulated as a single entity, ICE needs to cleave them before proceeding with an IPO of Euronext, which owns stock exchanges on the European continent, he said today. The company plans to jettison Euronext in mid-2014, ICE said when updating investors on the merger during a conference call.
Sprecher gained the Liffe financial futures business by purchasing NYSE Euronext, giving him interest-rate contracts for the first time after years of trying to offer them. To get them, he had to acquire NYSE’s traditional business, equities trading, at a time when profits have dwindled because of regulatory and technological changes.
“The first order of business is to complete the extensive work to separate Liffe from Euronext,” Sprecher said on today’s call. The company is working with regulators on the reorganization, he said. It may retain a stake in the European exchange business after the public offering, he said.
Euronext operates stock exchanges in Paris, Amsterdam, Brussels and Lisbon.
ICE now believes it can wring $500 million in cost savings out the operations it acquired with NYSE Euronext, an increase from the target of $450 million announced in December, the company said today.
Among the changes, Sprecher said he decided to keep NYSE’s data centers in the U.S. and Europe, after initially planning to sell them when agreeing to purchase NYSE Euronext in December. Technology businesses such as SuperFeed, Nyfix, Wombat and Appia won’t be kept, he added.
ICE will shift the interest-rate derivatives business onto its existing European platform, called ICE Futures Europe. That includes winding down NYSE Liffe U.S. and shifting contracts to the London-based market.
Under ICE’s leadership, NYSE’s U.S. stock exchanges will be the industry’s lowest-cost competitor, Sprecher said. The three exchanges handle more than 20 percent of U.S. equity trading, giving ICE the biggest share of the market, according to data compiled by Bloomberg.
“Nobody will have an incremental margin like we do, because of the breadth and footprint of operations that we have,” he said. “I’m going to task our people with being the lowest, and I think it’s incrementally achievable.”
On a Nov. 5 conference call, Sprecher said he believes small investors get ripped off in today’s equity markets. ICE needs to take the lead in helping improve the structure of markets to ensure they’re fair, he said today, adding that he has the support of many industry chiefs.
“I’ve been pleasantly surprised that a lot of major CEOs that are in the equity trading business have been really supportive, are anxious to drive change,” Sprecher said today. They “want to put more customer protections and market protections into the system.”
ICE also agreed today to buy Singapore Mercantile Exchange Pte for $150 million, gaining a futures market and a clearing and settlement license in Asia. Sprecher said he reached out to executives last year at Financial Technologies India Ltd. (FTECH) who created the Singapore market because it’s easier for Western companies to buy existing bourses in Asia than attempt to create one on their own.
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