The big banks are getting out of the index business.
Bank of America Corp.’s Merrill Lynch unit is selling its bond indexes to New York Stock Exchange owner Intercontinental Exchange, the firm announced Thursday, while declining to disclose terms. ICE will have nearly $1 trillion in assets attached to its indexes when the deal closes.
The lender is the third to sell its bond index business in recent years. Banks have also been getting rid of indexes used in other markets such as commodities, finding that holding onto index businesses requires investment in people and technology, particularly as indexes are increasingly used in investment products.
The banks are giving up indexes as they become more popular than ever. Money has been rushing into so-called passive investments that seek to track benchmarks, making indexes increasingly central to the financial markets. The exchange-traded fund business surpassed $4 trillion in global assets in April, according to ETFGI LLP, a London-based exchange-traded-product consultancy.
“Certainly the passive investing wave, that rising tide has lifted all ships that are in the indexing business,” said Dan Connell, head of the market structure and technology practice at Greenwich Associates.
Citigroup is offloading its fixed income indexes and analytics to the London Stock Exchange Group for $685 million, the firms announced Tuesday. Barclays PLC said in 2015 that it would sell its index business to Bloomberg LP for $782 million. The transaction went through in August 2016, making Bloomberg the largest index provider in the bond market.
Meantime, exchanges have found indexes increasingly useful, in part because they can be linked to futures contracts and other types of tradeable products.
For ICE, the purchase of the index business will increase the dollar amount of assets tied to its fixed income indexes by almost 20-fold. It comes as ICE increasingly makes a push into the bond market, following the 2015 agreement to purchase Interactive Data Corp., which provides bond-price data.
“We believe the BofAML Global Research FICC indices will offer customers more choice alongside the ICE U.S. Treasury indices and NYSE equity indices as comprehensive, trusted benchmarks,” said Lynn Martin, president and chief operating officer of ICE Data Services, in a press release.
– Telis Demos contributed to this post
June 01, 2017 at 10:46PM
from Ben Eisen
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