Euronext has acquired 51% of SecFinex, the London-based electronic trading platform for securities lending. The acquisition, which is expected to be completed in the first quarter of 2007, brings to an end a period of uncertainty for Sec Finex, which needs to upgrade its technology platform, and came close this year to selling itself to inter-dealer broker ICAP before the major shareholders decided they could obtain a higher price elsewhere.
Launched at the peak of the TMT boom in 2000, SecFinex aims to provide securities lending traders with secure, Internet-based access to a live, price-driven marketplace. A cross-section of lenders, borrowers and intermediaries, including some of the major securities lending players in Europe, currently participate in SecFinex.
Being acquired by Euronext will enable SecFinex to extend its client base to members of Euronext and Euronext.liffe, and facilitate access to post-trade processing. “We welcome Euronext as the main shareholder, and are convinced that its reputation, sales network and experience as a market operator, combined with the widely acknowledged expertise of SecFinex in securities lending, will provide a solid foundation for growth in a rapidly developing trading and exchange landscape,” says Allen Postlethwaite, CEO of SecFinex.
For Euronext, the acquisition will give clients cheap and automated access to a securities lending market that is expanding rapidly in Europe. Consultants Celent estimate outstanding balances exceeded US$500 billion in European equities in 2005, and Spitalfields Advisors put the size of the global market at over US$4 trillion.
“Acquiring an interest in SecFinex will enable us to diversify the high added-value services available to our clients and enhance the liquidity of the securities lending market in Europe,” says Marianne Demarchi, Executive Director Cash Markets and Listing, in charge of Marketing and Business Development at Euronext. “This acquisition should give fresh impetus to growth in this area in Europe and is a new move towards bringing banking partners into a fast-growing and promising market.”
Global securities lending balances are projected to increase by more than 20% over the next three years, with the European markets contributing most of the growth. In an OTC market where transactions are still completed mostly over the telephone, growth in volumes should automatically lead to stronger demand for electronic trading, argue SecFinex and Euronext. The volume of transactions traded electronically has increased five fold since 2003 and is expected to double over the next three years.
SecFinex is to remain an independent company, with Euronext represented on its managing board. The other main shareholders – Socit Gnrale Corporate and Investment Banking and Fortis Merchant Bank – says they have “joined Euronext in committing to develop SecFinex’s market position. This structure will facilitate growth at SecFinex by providing the resources to become the leading force in online securities lending in Europe.”
The terms of the purchase, which requires regulatory approval, were not disclosed. It s expected to be completed by the end of the first quarter.