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Dealmaking Deutsche Boerse CEO Spends $1.5 Billion in Spree

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Since becoming chief executive officer less than 60 days ago, Deutsche Boerse AG’s Carsten Kengeter has spent about $1.5 billion to buy a currencies trading platform and to take sole control of the most-important euro-area stock index.

The pace of the new Deutsche Boerse chief, whose resume includes 13 years as a Goldman Sachs Group Inc. partner, marks a departure for a company that missed out on Hotspot FX in January and was barred by European regulators from buying the New York Stock Exchange’s owner in 2012.

Kengeter said his start isn’t particularly fast considering he’s had 25 years in the industry to prepare for it. His appointment was announced in October, and Kengeter spent several months on the Frankfurt-based company’s board before taking over as CEO.

“I have spent quite a bit of time looking at the fintech industry and doing a number of things in it,” he said in a phone interview Monday evening. “I have always been interested in technology, and I have spent a lot of time looking at regulation. So all of these kind of coalesce to know relatively more than someone who would have a cold start.”

Exchanges are hungry to diversify. In Europe, for example, stock market operators have seen profits evaporate amid MiFID regulations that spurred greater competition. Deutsche Boerse’s businesses include the Xetra stock exchange and Eurex futures market.

Deutsche Boerse said in a statement Monday that it seeks to be “the global market infrastructure provider of choice” and to be “top-ranked in all its activities.”

Rethinking Strategy

Repackaging trading data and entering foreign-exchange have been some of the most-sought-after growth engines for exchanges.

“It’s clear that traditional exchanges have to rethink their business models,” said Rebecca Healey, market structure analyst at Tabb Group LLC in London. “It’s about staking their claim on the future exchange business.”

London Stock Exchange Group Plc has been lauded as one of the successes. It became the majority owner of LCH.Clearnet Ltd. in 2013, and its shares have rallied 48 percent since the company said in May 2014 that it was in talks to buy Frank Russell Co. for its index business. It later completed that deal. Deutsche Boerse has risen 46 percent during the same period of time.

Likewise, Intercontinental Exchange Inc., which bought NYSE Euronext in 2013, bringing aboard a derivatives business called Liffe, became a global powerhouse in part through its acquisitions.

Financial Crisis

Kengeter, a German citizen, succeeded Reto Francioni, who led Deutsche Boerse for about a decade. Zurich-born Francioni piloted the company through the 2008 financial crisis, from which global exchanges largely emerged as victors in the ensuing avalanche of regulation. When the purchase of NYSE’s parent, NYSE Euronext, was rejected by European regulators in 2012, Francioni called it a “black day for Europe.”

People close to Kengeter describe him as a calculated risk taker. While a partner at Goldman Sachs, he spent four years in Hong Kong with his family, during which time he learned to speak a little Mandarin.

The exchange operator plans to open a derivatives exchange in Singapore next year. It’s also creating a Frankfurt-based venture with two Chinese exchanges to offer yuan-denominated instruments. Kengeter said no geography is off limits for consideration.

“The Asian expansion has been a project of the company for some time,” he said. “We are not ignoring the United States as a big market, and I -- having been a part of Goldman Sachs for so many years -- have a lot of interest in that market. However, there is also a very formidable competitive set in the U.S., so whatever we do there has to be very well thought through.”

(Adds ICE acquisitions in 10th paragraph. To read the full interview, click here.)