FTSE Group, part of London Stock Exchange Group (LSEG), and TMX Group are to combine their fixed income index businesses in a new joint venture.
FTSE TMX Debt Capital Markets will be the third largest fixed income exchange-traded fund (ETF) index provider globally.
Together these indices are used as benchmarks for more than CAD1trn in fixed income assets.
TMX Datalinx is TMX Group’s information service division. Its fixed income index business, PC-Bond, will be combined with FTSE’s existing international fixed income index business upon completion. PC-Bond is a provider of fixed income indices in Canada; FTSE is a provider of fixed income indices in the UK. FTSE will own a 75 per cent majority stake in the joint venture, with TMX Group holding a 25 per cent stake.
FTSE TMX Debt Capital Markets will build on the successful track record of both organisations, combining the strengths of FTSE and TMX Datalinx to provide innovative fixed income index and analytical products and services. The transaction will significantly strengthen FTSE’s position in fixed income, the second largest asset class globally with approximately CAD13.7trn invested. It will also increase FTSE’s profile in North America.
For TMX Datalinx, the joint venture will enable more rapid global expansion as it exports its fixed income index and analytic capabilities by leveraging the global distribution reach of FTSE, one of the world’s most recognised index brands.
Mark Makepeace, chief executive of FTSE & LSEG director of information services, says: “The fixed income market represents a significant growth opportunity for FTSE. In partnering with TMX Datalinx we can quickly create the scale, quality of operation and global distribution necessary to be a significant player in this rapidly evolving part of the index industry. To accelerate our expansion into North America, a key growth market for us, FTSE will be establishing an office in Toronto.”
Eric Sinclair, president TMX Datalinx and group head of information services, TMX Group, says: “This transaction provides TMX Datalinx with a new global presence in the fixed income index business. By partnering with FTSE, we will grow the business globally, while continuing to serve our existing Canadian clients with the excellent quality index suite they trust and rely upon.”
Demand for fixed income indices continues to grow rapidly driven by the need for multi-sourced prices, high governance standards and low cost strategies. FTSE TMX Debt Capital Markets will use the power of PC-Bond’s fixed income capabilities and methodology to offer the global financial and capital markets community a suite of fixed income indices and analytics tools and to use this as a platform for future expansion.
In addition to holding a 25 per cent interest in the joint venture, TMX Group will receive CAD112.2m (GBP72.2m), subject to adjustments, which will be funded from existing LSEG cash resources. The transaction will be slightly dilutive to earnings per share for TMX Group in 2013. The business, which will be jointly headquartered in London and Toronto, employs nine people and had combined pro forma revenues of CAD21.3m (GBP13.7m) in 2012.