The world’s biggest futures exchange operator CME Group Inc plans to purchase derivatives brokerage GFI Group Inc as part of its expansion strategy into global FX and European energy markets.
CME, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade plans to buy GFI in an all-stock only transaction valued at $580 million and take on outstanding debt worth $240 million, resulting in a cumulative value of about $820 million, reported Reuters.
CME will thereafter hive out GFI’s wholesale brokerage unit and sell it to a private consortium managed by GFI management in a cash deal worth $165 million, and assumption of about $63 million in total liabilities. Once the deal is finalized, CME will part with about $655 million for 2 GFI business units known as FENICS and Trayport, tax benefits not included.
“CME lacks real penetration over in Europe in energy,” Richard Repetto, a Principal at Sandler O’Neill, told Reuters. “That’s what this Trayport platform is all about.”
The Trayport platform gives traders, exchanges and brokers access to network, software and hosting services covering about 85 percent of all Europe’s wholesale gas and power deals, according to Martin Fraenkel, who head’s CME’s international energy division. Fraenkel said that Trayport will be independent of CME, and that while a huge proportion of Trayport’s transactions aren’t handled via exchanges, he expects new regulations to promote the execution of transactions via exchanges.
CME’s global energy business processes 1.7 million contracts daily, including 500,000 contracts daily in Henry Hub, the U.S natural gas benchmark contract.
FENICS is a provider of risk management, analytics, price discovery, and connectivity services for international OTC FX options markets. It is expected to complement CME’s forex futures and options business. FENICS is also expected to continue working for GFI Group as the sales agent for wholesale market data. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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