TMX Group Agrees to Acquire ICE’s Trayport for $720 Million

ICE was told for the third time that it must sell Trayport which it acquired for $650 million in December

TMX Group Limited, operator of the Toronto Stock Exchange and another four marketplaces, has agreed to buy the broker-tech platform licenser Trayport from Intercontinental Exchange Inc., which owns futures markets and the New York Stock Exchange.

TMX Group will pay £550 million ($721.2 million) to acquire the energy trading technology shop, including £350 million in cash and £200 million in exchange for selling Natural Gas Exchange (NGX) and Shorcan Energy Brokers (Shorcan Energy) to ICE.

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The buyer is approved by the UK competition authority (CMA), but acquiring NGX and Shorcan Energy is still subject to approvals, anticipated to close in the next few months.

Earlier in July, ICE was told for the third time that it must sell Trayport, the energy trading technology shop it acquired for $650 million in December 2015. The UK Competition and Markets Authority (CMA) selected the forced sale option to reverse ICE’s takeover of Trayport, as the watchdog decided that the deal undermines competition. The independent group rejected alternative remedial actions, such as forcing Trayport to offer better terms to customers, concluding that it would not be effective.

As part of Canada’s bourse operator, Trayport will continue to serve its customers, which include energy producers and consumers, brokers, exchanges and clearing houses, with its existing technology platform.

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ICE loses final battle

The Competition Appeal Tribunal said earlier this year that it backed a ruling by the UK antitrust watchdog that the deal could curb competition in the European energy trading market.

ICE beat arch-rival CME Group to buy the broker-tech platform license, but the CMA later believed that a complete divestiture was the only effective remedy to the substantial lessening of competition.

Earlier in August 2016, the CMA highlighted that ICE’s investment in Trayport could hurt competition for wholesale European utilities trades, where Trayport’s software helps facilitate 85 percent of activities. It also voiced concerns of possibly worse terms for traders due to higher fees for executing and clearing trades.

Other market participants such as Nasdaq, EEX, Tradition and ICAP have told CMA that they fear OTC gas and power markets could be subject to the mandatory clearing provisions that are being applied to other commodity markets. According to the CMA, all the third-party submissions said that the sale of the Trayport business is the only comprehensive solution to all aspects of its competition concerns.

Commenting on the deal, Lou Eccleston, CEO of TMX Group, said: “The acquisition of Trayport brings a proven team of product development, data, analytics and sales talent to TMX and immediately strengthens our global data and analytics business. From a strategic perspective, this transaction will significantly accelerate TMX’s global expansion, increase the portion of our revenue from recurring sources and enhance the portfolio of analytics products in our Market Insights business. As we look across our multi-faceted business, we see significant opportunities to leverage Trayport’s proven expertise and premier position to enable TMX to continue to thrive in today’s global marketplace.”

ICE Chairman and CEO Jeffrey C. Sprecher added: “We look forward to offering our customers further efficiencies and risk management solutions in the North American physical energy markets to meet their needs for capital efficiency and regulatory compliance. We believe this is a positive result for our customers and shareholders, and we are divesting Trayport in a manner consistent with the CMA’s requirements. We believe expanded clearing solutions will be appreciated by customers seeking more choice in risk management and more efficiency in how they execute and clear.”

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