The deal gives Nasdaq more exposure to fixed income markets, at a time when falling stock trading volumes have spurred the exchange operator to find other income sources. ESpeed operates a fully executable central limit order book for electronic trading in US Treasuries.
The company expects to offer customers increased access to a greater variety of trading instruments as a result of the acquisition.
Nasdaq said last month it planned to create a market for trading shares of unlisted companies in a joint venture with trading platform SharesPost.
The total consideration for deal is up to $1.23bn, including an earn-out of up to $484m of Nasdaq OMX common stock to be paid over 15 years, BGC said.
The acquisition of eSpeed helps diversify Nasdaq’s offerings in the US, said Christopher Allen, an analyst at Evercore Partners.
“You always want some asset class diversification which Nasdaq really doesn’t have in the US, where they just have cash, equity and equity options,” he said.
The deal is expected to add to Nasdaq’s earnings within the first twelve months after closing – expected by mid-2013 – the exchange operator said.
The risk for Nasdaq, however, is that it is buying eSpeed at a time when trading Treasuries might be at a cyclical low, Allen said. Deutsche Bank was the financial adviser to Nasdaq.
The firm expects to fund the purchase with cash on hand and long-term debt.