$5 billion deal creates US government debt superstore

In the market for US government debt? A transatlantic deal announced Thursday has you covered.CME Group is buy...

Posted: Mar 29, 2018 2:44 PM
Updated: Mar 29, 2018 2:45 PM

In the market for US government debt? A transatlantic deal announced Thursday has you covered.

CME Group is buying London-based exchange operator NEX for -3.9 billion ($5.5 billion), creating a one-stop shop for purchasers of US debt.

CME, which is based in Chicago, dominates the market for US Treasury futures trading. NEX owns the world's leading electronic trading platform for US Treasuries.

The deal, which had been rumored for weeks, was struck despite concerns about deals between exchanges in different countries. NEX CEO Michael Spencer branded it an "industry changing transaction."

Justin Bates, an analyst at Liberum, said the deal would indeed deliver a jolt to the market.

Bates said the increased scale of the combined company would create a "snowball effect." It would immediately handle more transactions, and in turn attract even more customers.

The companies said the deal could generate cost savings of $200 million a year by the end of 2021. Spencer will join the CME board as part of the transaction.

Related: The US needs to borrow almost $300 billion this week

CME said the deal would also help expand its international reach.

"Building on NEX's deep roots in Europe and Asia and CME's strong technology platform, we will transform our international profile and broaden our distribution network," said CME chief executive Terry Duffy.

The deal still must be approved by regulators.

Plans to combine the London Stock Exchange with Deutsche Boerse, which runs the main German stock market, was blocked last year by EU regulators.

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