NASDAQ OMX Group Inc.
) is currently in discussion with London-based LCH.Clearnet to
divest its International Derivatives Clearing Group ("IDCG"). The
acquisition of IDCG is consistent with LCH.Clearnet's strategy of
enhancing its presence in the US market. However, the financial
terms remained undisclosed.
Following the completion of the deal, a likely exchange of
shares between NASDAQ and LCH.Clearnet will take place. However, in
a separate development, London Stock Exchange ("LSE") is gearing up
to buy a majority stake (approximately 60%) in LCH.Clearnet for
$1.08 billion by the end of this fiscal.
In 2008, NASDAQ acquired a majority stake in IDCG, but it became
operational only last year and remained a dormant player in the
interest rate swaps market with very little success even in the
emerging markets. Last year, NASDAQ opted to acquire minority stake
in LCH.Clearnet in order to free up some portion of its capital to
utilize it for other business operations.
The recent deal provides LCH.Clearnet, the largest global
clearing house for bank-to-bank swaps clearing, an opportunity to
expand its SwapClear clearing services further in the US market
with a US clearing house that is licensed to clear swaps and
futures trades. However, it is uncertain whether LCH.Clearnet would
hold on to IDCG's process of converting swaps into futures.
Standard and Poors' (S&P) had assigned 'A+/A-1' counterparty
credit ratings on the LCH group. The rating agency maintained the
rating on CreditWatch with negative implications when LCH.Clearnet
called to sell a majority stake to the London Stock Exchange.
S&P stated that if the deal materializes, it would have no
impact on the counterparty credit ratings.
Nevertheless, the rating agency also stated that they might
affirm the long-term rating on LCH.Clearnet or reduce it by a
couple of levels following the completion of the deal. But if the
deal doesn't materialize, then S&P would reaffirm the current
In a separate development, NASDAQ launched NASDAQ Commodity
Index Family to provide decent coverage for all major commodity
sectors to the investors. NASDAQ Commodity Index Family will
provide different types of investment strategies to the investors
using five separate versions.
NASDAQ Commodity Index Family will focus on energy, industrial
metals, precious metals, and agriculture and livestock sectors. It
will be monitoring U.S. dollar denominated commodities traded on 10
U.S. and U.K. exchanges.
Pursing the strategy of a continued growth, NASDAQ signed a deal
with Africa's second largest exchange Nigeria's Stock Exchange
("NSE"), where it would trade on the NASDAQ X-Stream platform. NSE
also intends to go live in the second quarter of 2013.
Yesterday, NASDAQ reported its first quarter results before the
bell. Its operating earnings per share of 61 cents fell shy of the
Zacks Consensus Estimate of 63 cents, but were in line with the
prior-year quarter's earnings. Total net exchange revenue edged
down 0.5% year over year to $411 million, also lagging the Zacks
Consensus Estimate of $421 million.
The downside was primarily attributable to reduced revenue from
market services, weak volumes and continued sluggishness in cash
equity and derivative trading. These were partially supported by
modest growth in market data, issuer services and market technology
We retain our long-term Neutral recommendation on NASDAQ. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the stock over the near
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