January 24, 2013

InterContinental Exchange’s $8.2 billion acquisition of NYSE Euronext is on track to close in the second half of the year, and once that is finalized, the exchange operator will look to spin off the European stock exchanges.

That’s according to Dominique Cerutti, president and chief executive officer of NYSE Euronext told CNBC’s Maria Bartiromo in video interview today at the Davos World Economic Forum in Switzerland.

As part of the deal with ICE, the Atlanta-based global energy and commodities exchange operator, said it would IPO the Euronext business consisting of the continental European exchanges – Paris, Brussels, Amsterdam and Lisbon.

Cerutti told CNBC that the plan is not to further globalize the stock exchanges, but rather to separate Euronext and bring them closer to their local economies, a process he termed “regionalization.” The No. 1 reason for the marriage of ICE and NYSE Euronext is derivatives. “We see the derivatives market accelerating and globalizing, calling for consolidation, scale and scope. That is the core of the deal that ICE is doing,” said Cerutti with the backdrop of snow-capped mountains behind him. While the derivatives markets are becoming more global, Cerutti said the trend in equities is toward regionalization.

Observers say that ICE wants to own Liffe, an important derivatives exchange in Europe. “It would give them Euronext’s Liffe market which would essentially broaden their footprint to make them bigger to compete against the CME,” said Louis Lovas, CEO of OneMarketData, a data management and Big Data analytics, in an interview with Advanced Trading.

When CBNC’s Bartiromo called Liffe the “jewel in the crown,” Cerutti agreed. “Indeed derivatives is the booming part,” indicating that is where participants are putting their risks and vulnerabilities. He indicated that risk management and post-trade are becoming more critical. “Regrouping Liffe to create one of the worldwide champion in derivatives and clearing" is seen as the focus of the combined company, according to Cerutti.

Since there are very few synergies or overlap between the two companies, NYSE Euronext’s CEO is not expecting objections from regulations on anti-trust grounds, noted Cerutti in the video interview. But he said they would listen to the competition authorities in the U.S. and Europe.

As for how ICE and NYSE Euronext plan to deliver $450 million in cost cuts, Cerutti told CNBC that would be generated over time from synergies linked to the merger and consolidation. Of the total, $150 million will come from Liffe integration and clearing synergies with ICE, he added. “Anytime there are mergers between two large companies, you have overlapping functions that you have to eliminate,” he told CNBC.

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Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in ...