CBOE BATS merger of $3.2bln: CBOE to enter FX market?


The two largest US exchange groups, CBOE and BATS have agreed to merge. What are the underlying motives for the CBOE BATS merger?

26 September, AtoZForex – The largest US options exchange, Chicago Board of Options (CBOE) has agreed to acquire BATS Global Markets (BATS), a leading US operator in Exchange Traded Funds (ETFs). Post the reports of last Thursday about a possible deal, the CBOE BATS merger got officially announced today by the parties involved.

The CBOE BATS merger is estimated at $3.2 billion, as per the valuation of $32.50 per BATS Global Markets’ share. The deal consists of 31 percent cash and 69 percent of CBOE Holdings stock, per the closing stock price on the 23rd of September at $70.30 per CBOE’s share.

Reasons for the CBOE BATS merger

The CBOE is expected to gain on an annual basis, approximately $50 million through expense synergies with BATS, particularly by cost-cutting. Other benefits of the CBOE BATS merger are the possibility to consolidate in the exchange business to go up against the LSE and Deutsche Boerse group in Europe. According to the statement, CBOE will be able to extend its reach geographically to offer its products and utilize the technology of BATS:

"CBOE Holdings expects to utilize Bats’ leading proprietary trading technology by migrating trading in all of the combined company’s markets onto a single, proven platform."

Once the deal is completed, the chief executive of CBOE Holdings, Edward Tilly will remain in position as the CEO of the merged company. Whereas, the CEO of BATS Global Markets, Chris Concannon will be taking on the COO and president role.

See also: Dutch AFM to ban Binary Options advertising

A step closer to the Forex market for CBOE

What the market should not overlook is that the CBOE BATS merger unlocks the possibility for CBOE to enter the foreign exchange market. Especially, after acquiring one of the largest exchange operators that is serving the market at the moment. Commenting on the acquisition, the CEO of CBOE Holdings, Edward T. Tilly stated:

“The acquisition of Bats is expected to strengthen our position as a global leader in innovative tradable products and services, and is a transformative next step in our growth strategy.”

BATS Global Markets does not only deal with derivatives, exchange-traded-funds (ETFs) and equities. The operator is also active on the Forex market, through previously acquiring Hotspot FX. Hence, the merger will allow CBOE Holdings’ to expands its product line across asset classes, european equities and BATS’ global FX positions.

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