DEALTALK-Exchanges hoping to add bond trading may have to pay up

Fri Apr 5, 2013 12:09pm EDT
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* LSE, NYSE seen as logical buyers for bond trading platforms

* Jump in ICAP shares has some wonder about deal prospects

By Jessica Toonkel

NEW YORK, April 5 (Reuters) - Exchanges looking to follow Nasdaq's lead into electronic bond trading platforms only have a handful of targets available, leaving interested buyers two options: pay up or be left out of the potentially lucrative market.

Nasdaq OMX Group struck a deal on Monday to buy electronic Treasuries-trading platform eSpeed from BGC Partners Inc for $750 million in cash, providing the exchange operator an entry into one of the world's largest and most liquid cash markets.

Robert Greifeld, Nasdaq's chief executive, called the deal a "true game changer" for the exchange's transaction business, noting that more than $500 billion is traded daily in the U.S. Treasury market.

While Nasdaq's stock plummeted 13 percent Tuesday on the heels of the deal, while shares of interdealer broker ICAP , which owns the only other large, electronic U.S. Treasuries trading platform, jumped almost 7 percent, indicating there might be more deals to be done.

Analysts showed skepticism, wondering why Nasdaq paid such a high premium -- 11 times eSpeed's EBITDA last year. Many were disappointed that Nasdaq suspended stock buybacks for the next several months as a result of the deal.

But with equity trading volumes flat, exchanges like Nasdaq are increasingly looking to diversify and getting into U.S. Treasuries and other bond trading makes sense.   Continued...