NYSE to Close SecFinex (revised) - Analyst Blog
December 02 2011 - 8:48AM
Zacks
Yesterday, Financial Times reported that NYSE
Euronext Inc. (NYX) is mulling the closure of its European
securities lending platform unit, SecFinex.
Based in London and founded in 2000, SecFinex is a global
electronic, web-based lending & borrowing trading platform. In
the same year, it also launched a private bilateral market,
introducing the first stock loan electronic platform in the
European region.
Further in March 2007, NYSE acquired a 51% stake in SecFinex,
whereby the latter operates as a subsidiary of NYSE’s LIFFE
Holdings plc. Société Générale and ABN Amro own the remaining 49%
stake.
Meanwhile, NYSE’s decision to shut down SecFinex is based on the
underperformance of the business. SecFinex had about 200
outstanding loans on its platform. Previously in 2009, SecFinex
launched central counterparty clearing on its trading platform,
allying with US’ Depositary Trust and Clearing Corp., constarined
by its ongoing debt and economic risks, the US regulatory pressure
and the bankruptcy of Lehman Brothers.
Given the abysmal performance of SecFinex, NYSE seeks to reposition
this business as the latter no longer desires to inject more
funds.
The decision is also inspired by the need to reduce the risk
exposure and expenses, as much as possible, from NYSE’s business
portfolio in order to smoothen the merger (worth $9 billion)
process between the company and Deutsche Boerse.
Meanwhile, the European Union Commission (EUC) antitrust commission
is probing the matter and expects to come out with a ruling that
could include clearing an operation or imposing pre-conditions such
as the selling of some assets, in order to mitigate competition
concerns of prime rivals such as NASDAQ OMX Group
Inc. (NDAQ) and CME Group Inc. (CME).
However, the fact that the deal will enable the combined entity to
own 90% of the futures exchange traded in Europe is
disconcerting.
On the flip side, a blockage of the deal is also possible, if the
companies involved do not commit themselves to solving these
concerns, although such a scenario is unusual. EUC is expected to
give out its report-card by the middle of this month. Hence, we
currently maintain a Neutral stance on NYSE, which is also
reflected in the Zacks #3 Rank #3 that implies a short-term Hold
rating.
(We are reissuing this article to correct a mistake. The
original article, issued December 1, 2011, had erroneously referred
to this action as related to the company’s pending Deutche Borse
deal, which is not the case.)
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