Intercontinental Exchange (Ice) has completed its acquisition of the Bank of America-Merrill Lynch (Baml) global research division's fixed-income index platform, which will become part of its data services. "With the addition of these indices, we are able to offer a comprehensive portfolio that includes the addition of more than 5,000 global fixed income, currency and commodity indices and leverages our trusted pricing and reference data solutions to meet the needs of our customers," said Lynn Martin (pictured), president and chief operating officer of Ice Data Services. "The addition of such a broad fixed income index product line will expand ICE’s AUM, including in the structured products segment."
The acquired indices will be renamed Ice BofAML Indices and become part of a suite that includes proprietary indices, and third-party index and exchange-traded fund (ETF) calculation services, as well as proprietary market data, pricing and analytics, desktops and connectivity solutions.
There are 30 matured products across markets linked to Bank of America-Merrill Lynch underlyings, including the 10+ Year US Corporate & Government Index, Africa Lion, Carbon Lead, China Consumer Brand Index, Emerging Markets, and Gulf Invest, according to SRP data.
There are also over 70 structured products featuring Ice listed on the SRP database, of which six leveraged with stop loss certificates sold in Norway are still live. Most of these products were sold in the US market (61 products). In addition, there are over 6,800 products featuring Ice-owned underlyings, including the NYSE, and NYSE Arca's Biotechlogy, Gold Bugs, Hong Kong 30, Oil Index, Telecom, and NYSE Euronext.
Ice's NYSE was also behind the launch earlier this year of the NYSE Zebra Edge Index, an index developed in collaboration with Zebra Capital Management that incorporates behavioural finance research on high-turnover, or 'popular' stocks, with the goal of capturing higher returns with lower volatility which was used by Nationwide a US fixed-indexed annuities provider.
The BofAML bond indices will also immediately make ICE one of the top index providers in fixed income, which is one of the fastest growing segments of the ETF landscape, according to Lynn. "We currently offer 272 indices covering specific segments of the structured products market, as well as many more indices that combine structured products with other segments of the fixed income market," said Lynn. "We have no immediate plans to expand coverage in the structured products space, but as always, we will continue to add to our product coverage in response to client demand."
The combined index family will include the second largest fixed-income indices by assets under management (AUM) globally, at nearly US$1 trillion, according to Ice. The full suite of indices are available on Ice's Global Index System, as well as a broad range of third-party research platforms and execution venues.
The sale by of indices coincided with a fine of £34.5m issued today (October 23) by the UK Financial Conduct Authority against Merrill Lynch International for failing to report 68.5 million exchange-traded derivative transactions between February 12, 2014 and February 6, 2016.
The fine is the first enforcement action against a company for failing to report details of trading in exchange-traded derivatives, under the European Markets Infrastructure Regulation. Reporting exchange-traded derivative transactions was one of the main reforms introduced following the financial crisis in 2008 to address the lack of transparency within financial markets. The bank agreed to settle at an early stage of the investigation and received a 30% reduction as a result.
Baml remains a top three issuer of structured products in the US retail market, where it has sold over $7.5bn across 373 products and 15% market share this year. The bank was the top issuer in 2016, with a 21% market share of the US retail market, followed by JP Morgan (18%) and Goldman Sachs (17%).
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