NASDAQ OMX Group Inc.
) announced the acquisition of one quarter of Amsterdam-based The
Order Machine (TOM) - Dutch cash equity and equity derivatives
trading platform. The company has been offered an additional
25.1% to acquire a majority stake in TOM.
TOM is partly owned ABN AMRO, IMC (a high-frequency trading
firm), Optiver (an electronic market maker) and BinckBank (an
online discount broker and bank that also provides order flow to
the trading venue). However, the acquisition is unlikely to have
any material effect on the financials of NASDAQ. Additionally,
the financial terms of the deal remain undisclosed and it is
expected to culminate upon the receipt of regulatory
Accordingly, the 8-year strategic alliance between the two
parties entails NASDAQ to provide its Genium INET technology to
the trading platform in London. On the other hand, NASDAQ will
benefit from the TOM's presence in the European markets through
the one-fourth acquisition of TOM, thereby enhancing the
company's global expansion strategy.
Additionally, the association with TOM brings in upgraded
technology and market expertise, as well as extended opportunity
to NASDAQ, enabling it tap the single stock options markets,
where the former holds a significant share. This should be
helpful given the rising demand for a variety of derivative
These factors will also accelerate NASDAQ's ability to improve
price discovery and reduce its trading costs. Consequently,
NASDAQ will also reap benefits of flexible connectivity, thereby
ensuring low latency processes.
Gaining Edge in Europe
NASDAQ's latest part-acquisition of TOM also elucidates its
strategic move to attain competitive edge in Europe, where
derivative giants including
NYSE Euronext Inc.
) and Deutsche Boerse AG share majority of the market share.
Other dominant market players such as
CME Group Inc.
) are also seeking to greener pastures in Europe, given the
regulatory challenges faced in the US lately.
Expanding its derivative index in Europe, in June this year,
NASDAQ had also announced its plan to build a new interest rate
derivative trading platform - NASDAQ NLX - in London. The trading
platform is scheduled to debut by the first quarter of 2013.
NASDAQ NLX will operate as a separate entity within NASDAQ.
Further, in July 2012, NASDAQ purchased NOS Clearing ASA, a
Norwegian commodities clearing house, adding another operating
arm in Europe. Nevertheless, we cast a neutral outlook on the
company's attempts to expand given the global economic volatility
and currently remain on the periphery to assimilate the future
NASDAQ carries a Zacks Rank #3 that implies a short-term Hold
rating, while the long-term recommendation stands at Neutral.
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