Nov 20, 2013

    SMX put on ICE to the tune of $186m

    INTERCONTINENTAL Exchange Group (ICE) has agreed to buy Singapore Mercantile Exchange (SMX) for US$150 million (S$186 million) to add commodity futures trading in Asia, where China reigns as the biggest user of everything from energy to metals.

    Atlanta-based ICE will buy the exchange operator and Singapore Mercantile Clearing Corp from Financial Technologies India, the Mumbai-based company said yesterday in a statement.

    The acquisition will help ICE, led by chief executive officer Jeffrey Sprecher, expand its revenue sources to offset falling profits from traditional US equity trading.

    "SMX has its own clearing house and a trading licence, which would offer a great opportunity for any North American or European operator looking to set up in Asia," said Mr Thomas McMahon, former CEO of SMX.

    Obtaining such trading licences in Singapore typically takes 18 to 24 months, Mr McMahon said.

    Financial Technologies will use the proceeds to repay debt after regulators shut down a spot commodity exchange it ran in India.

    The National Spot Exchange, an Indian spot-trading platform controlled by Financial Technologies, suspended trading on July 31 after the government sought details on its settlement cycle.

    The exchange broke rules by permitting the sale of goods traders didn't keep in its warehouses, according the country's commodities futures market regulator.

    Financial Technologies also owns a 26 per cent stake in India's biggest platform for commodities, Multi Commodity Exchange of India, as well as the Global Board of Trade in Mauritius, Bourse Africa in Botswana and Dubai Gold & Commodity Exchange.

    "They have to sell whatever they can," Mr Kishor Ostwal, managing director at CNI Research in Mumbai, said in a telephone interview. "I don't think they have any option."

    SMX, started in August 2010, lists futures of gold, silver, industrial metals and currencies. It recorded US$134 billion of cumulative trading volume by the end of last year, according to its website.

    The company's loss for the 12 months through March shrank to $16.6 million, from $20.6 million a year earlier, according to a statement previously posted on its website.

    ICE last week completed its acquisition of NYSE Euronext, the 221-year-old exchange operator, for US$10.9 billion in cash and stock.