CME Acquires Elysian System - Analyst Blog

Expanding its clearing services operation, yesterday CME Group Inc. (CME) announced the acquisition of London-based Elysian Systems Ltd. for an undisclosed price. The full integration with CME's clearing services is expected in 2011. However, other terms are yet to be revealed.

Elysian Systems is an independent provider of electronic trading and market technology. The company's technology is globally used by more than 200 banks, brokers and exchanges through over 1400 screens, its most popular product being Liquid Trading Platform. This product facilitates online trading across a range of financial products including energy and agricultural commodities and credit default swaps.

The acquisition of Elysian System will enable CME to achieve operating efficiencies in its ClearPort over-the-counter (OTC) clearing services. Besides, the deal will benefit customers with a single platform to access the diverse energy markets, which is rapidly gaining momentum.

The global market participants will now gain by availing best prices along with added benefits of straight-through-processing. Moreover, a central counterparty clearing also takes care of the safety and security of the transactions.

The unity of both the entities will not only provide the a front-end for trading and execution in global OTC energy markets, it will also boost CME's competitive advantages, particularly, with that of IntercontinentalExchange Inc. (ICE), which has been vigorously expanding and coming up as an arch-rival in the rapidly growing energy and metals' sector. Hence, we believe that the acquisition perfectly complements CME's long-term growth profile.

Earnings Recap

CME's third quarter earnings per share of $3.66 were in line with the Zacks Consensus Estimate but came way ahead of $3.04 reported in the year-ago quarter. Operating income increased 10% year over year to $443 million, while net income increased 21% year over year to $244 million. Top line growth was partially offset by higher-than-expected expenses.

Overall, we believe that the gradual economic recovery is exerting a positive influence on CME Group's volume. Moreover, the company's internal efforts to promote, expand and cross-sell its core exchange-traded business through meaningful acquisitions, a diverse and strong portfolio along with its global presence will continue to generate decent growth in the longer term. However, increasing expenses and reducing rate per contract remain a cause of concern.

 
CME GROUP INC (CME): Free Stock Analysis Report
 
INTERCONTINENTL (ICE): Free Stock Analysis Report
 
Zacks Investment Research