FTSE and TMX combine fixed income index businesses

Feb 27th, 2013 | By | Category: ETF and Index News

FTSE Group and TMX Group have agreed to merge their fixed income index businesses to form FTSE TMX Debt Capital Markets. The combined entity will be 75% owned by FTSE, with TMX holding the remaining 25%. FTSE is wholly owned by the London Stock Exchange Group.

FTSE and TMX combine fixed income index businesses

FTSE Group (a wholly owned subsidiary of the London Stock Exchange Group) and TMX Group have agreed to combine their fixed income index businesses to form FTSE TMX Debt Capital Markets.

The combined business will be the third largest provider of fixed income indices to exchange-traded funds (ETFs) globally, after Barclays and Markit iBoxx. A fourth major player in the fixed income index space is MTS Indices.

The joint venture combines FTSE’s UK gilt and international bond indices with TMX Datalinx’s PC-Bond range to create one of the leading global fixed income franchises. TMX Datalinx is the information service division of TMX Group.

PC-Bond is the predominant provider of fixed income indices in Canada, best known for its DEX indices, while FTSE is the leading provider of gilt (UK government bond) indices and also a significant fixed income player in international markets.

Together, the entity’s combined indices are used as benchmarks for approximately £640 billion in assets, invested across ETFs, mutual funds and segregated mandates.

The transaction will significantly strengthen FTSE’s position in fixed income, the second largest asset class globally with approximately £8.8 trillion invested. It will also increase FTSE’s profile in North America, particularly Canada.

For TMX, the joint venture will enable more rapid global expansion as it exports its industry-leading fixed income index and analytic capabilities by leveraging the global distribution reach of FTSE, one of the world’s most recognised index brands.

Commenting on today’s announcement, Mark Makepeace, CEO of FTSE, said: “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, added: “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% interest in the joint venture, TMX Group will receive £72 million, subject to adjustments, which will be funded from existing London Stock Exchange Group cash resources. The business, which will be jointly headquartered in London and Toronto, employs nine people and had combined pro forma revenues of £13.7 million in 2012.

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