Intercontinental Exchange (ICE) Consolidates Index Services

Intercontinental Exchange Inc. (NYSE:ICE) has agreed to acquire Global Research division’s index platform from Bank of America Merrill Lynch (NYSE:BAC). The transaction, the terms of which are still under wraps, is expected to culminate in the second half of 2017. With optimism surrounding the acquisition, shares of ICE gained 0.25% in yesterday’s trading session.

The BofA Merrill Lynch Global Research index platform consists of over 5,000 fixed income, currency and commodity (FICC) indices across the globe. These boast being the second-most used fixed income indices by assets under management (AUM). Following the acquisition, the combination will result in an asset compilation of nearly $1 trillion in the AUM benchmarked combined fixed income index business of Intercontinental Exchange. However, the transaction is not expected to be accretive to 2017 financial results.

Per the agreement, the indices will be re-branded as ICE BofAML and come under the umbrella of ICE Data Services. The company is well positioned to ramp up the index platform, leveraging ICE Data Services’ expertise. The addition of BofA Merrill Lynch Global Research index will further help it to consolidate index services.

Carrying a Zacks Rank #3 (Hold), Intercontinental Exchange as a securities exchange has a solid track of strategic buyouts, including Standard & Poor’s Securities Evaluations, Inc., or SPSE, Credit Market Analysis Limited, and NSX & Atrium among others. Several strategic acquisitions have not only expanded Intercontinental Exchange but have also resulted in expense synergies. The most significant of these deals is the acquisition of NYSE in Nov 2013, which cemented Intercontinental Exchange’s position as a premier stock trading platform. The takeover also transformed the company into the second-largest global exchange group, thus allowing over 60% accretion in market capitalization.

These efforts reflect the company’s diversifying aims to emerge in rapidly growing markets, while enhancing its capital efficiency, cross-selling and product development opportunities in the long run. Hopes are pinned on the company to further seek strategic alliances and acquisition opportunities to gain scale and adapt to changing industry dynamics.

Shares of Intercontinental Exchange have inched up 0.72% quarter to date, outperforming the Zacks categorized Securities and Exchanges industry’s gain of 0.09%. Successful integration of acquisitions, organic growth initiatives, strong operational performance and solid capital position should continue to drive shares.

Stocks to Consider

Better-ranked stocks from the finance sector are CBOE Holdings Inc. (NASDAQ:CBOE) , MarketAxess Holdings Inc. (NASDAQ:MKTX) and Total System Services, Inc. (NYSE:TSS) .

MarketAxess is a leading multi-dealer trading platform that offers institutional investors access to global liquidity in products like U.S. high-grade corporate bonds, emerging markets and high-yield bonds, European bonds, U.S. agency bonds, credit derivatives and other fixed-income securities. The company had an average positive surprise of 7.26% in last four quarters. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

CBOE Holdings is a leading derivative exchange in the U.S., offering trading in stock or equity options, index options, exchange traded-products (ETP) and so on. The company had an average positive surprise of 4.96% in the last four quarters. The stock sports Zacks Rank #1.

ProAssurance operates as a holding company for many property and casualty insurance companies. The company had an average positive surprise of 16.59 % in the last four quarters. The company carries Zacks Rank #2 (Buy).

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