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MarketAxess Pledges Investment in Xtrakter after Acquisition from Euroclear

The agreement between MarketAxess and Euroclear under which the former will acquire the latter’s Xtrakter subsidiary is expected to strengthen MarketAxess’ products and position in European markets, and clear the decks for Euroclear to concentrate on developing core services. The deal includes payment of £25 million ($42 million) in cash and the transfer of 70 Xtrakter employees to MarketAxess, and is expected to complete subject to Financial Services Authority (FSA) approval in the first quarter of next year.

Xtrakter was acquired by Euroclear from the International Capital Market Association for an undisclosed sum in 2009. Its onward sale to MarketAxess follows a strategic agreement between Euroclear and Markit transferring the distribution and commercialisation of Euroclear’s Eurobond reference data to Markit. The agreement left in place a standard vendor licensing arrangement covering Xtrakter data between Euroclear and Markit. This is now expected to move with Xtrakter’s client base, employees and technology to MarketAxess.

Commenting on its decision to sell Xtrakter, Euroclear states: “Euroclear has decided not to invest further in Xtrakter. Instead, it will focus on developing its core services, such as collateral management services, to meet immediate client needs. The business synergies between Xtrakter and MarketAxess will strengthen Xtrakter’s position to play a key role in meeting market needs under MiFID II.”

MarketAxess was not the only interested party in a closed auction for Xtrakter, but was the only company to submit a formal bid that Euroclear accepted late last week. The company will maintain the Xtrakter brand and run the company as a subsidiary, building out its products and services. MarketAxess says that while the scale of the acquisition is not large it is particularly important to the company’s European arm as it will increase the employee base from 30 to 100, double revenue in Europe, and provide a broader set of products. Xtrakter products and services, predominantly a regulatory reporting system, trade matching service and information services including market and reference data, are focused on the European region, but MarketAxess does not rule out leveraging the company’s activities and selling them to US clients.

Rick McVey, CEO of MarketAxess, explains: “Xtrakter is a strong fit with our business and provides MarketAxess with an expanded set of services that are complementary to our core strengths in electronic trading, market data and straight-through processing solutions for global credit markets. It is a provider of regulatory trade reporting to the UK FSA and is well positioned to play a role in the UK and other European markets as regulators look to reduce trade settlement risk and increase market transparency under the proposed MiFID II mandate.”

As well as adding regulatory reporting to MarketAxess, which is best known for its fixed income trading platform, and additional market data services, Xtrakter will support the company in extending trade matching services that are largely used by dealers to include buy-side firms.

Jim Rucker, credit and risk officer at MarketAxess, says: “Our intention is to invest in Xtrakter and grow the business. Xtrakter has over 200 users, many of them dealers, buy-side firms and market data vendors. They will move over to MarketAxess and we will be able to sell our services to them and vice versa. We will also aim to attract new clients.”

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