The rush for fixed-income data is showing little signs of slowing, according to Intercontinental Exchange Inc. Chairman and CEO Jeffrey Sprecher.
Around the world, bond and credit markets have begun a metamorphosis, with trading slowly but surely migrating from emails and phone calls onto electronic-trading platforms.
Electronic trading accounted for roughly 20% of all corporate bond trading volume in 2017, which was nearly double the 11% share in 2007, according to data from research and consulting company Greenwich Associates. That transformation has created an accelerating tailwind for companies that provide data to the fixed-income markets, including the New York Stock Exchange's owner, ICE.
"It's a unique space," Sprecher said Aug. 1 during a call with analysts to discuss the company's second-quarter earnings. "We pivoted hard into acquiring indices, legacy data sets and other relationships, as opposed to execution venues, because that will not change with the electronification of the business, in our minds."
ICE has been working through the M&A markets over the last several years to build out its data offerings in the fixed-income markets, an effort that was jump-started by the company's 2015 purchase of Interactive Data Holdings Corp. for $5.22 billion.
The campaign to expand ICE's data business — a push that has not been limited to just fixed-income markets — comes as legacy exchange operators look to diversify their business models beyond trading and clearing, which can be sporadic sources of revenue that hinge on market activity. Data solutions, on the other hand, tend to offer companies like ICE a steadier stream of revenue. ICE posted a 5% jump in its total data revenue for the second quarter on a year-over-year basis.
Sprecher's comments came just hours after London Stock Exchange Group PLC made its $27-billion valued purchase of data and financial analytics provider Refinitiv official. The deal announcement marks the potential conclusion of the London bourse's yearslong attempt to merge with one of its rivals or diversify its business. At one point, ICE had discussed a potential acquisition of LSE.
Richard Repetto, an analyst with Sandler O'Neill, pointed out on the call that it appeared as if LSE had "taken a page out of [ICE's] playbook" by acquiring a data platform. The Refinitiv deal will also provide LSE with a majority stake in bond-trading platform Tradeweb Markets Inc, which went public in the U.S. earlier in 2019.
The Atlanta-based exchange operator's CEO expressed little surprise at the LSE-Refinitiv megamerger during the call, but added that ICE is still "well positioned" to operate in an increasingly competitive landscape where exchange giants continue to build out bond data as a key component of their businesses.
"It was somewhat inevitable that there was going to be a roll up in the space," Sprecher said. "It's a space we expect more competition in, it's a space we expect more consolidation around."