The TRADE: What was the strategy behind the acquisition of the Bank of America Merrill Lynch Global Research Index Platform at the end of 2017?
Lynn Martin: We acquired the BofAML® Indices to expand our offering around pricing and analytics products for our customers. Our Pricing & Analytics service comprises a variety of acquisitions that we have made over the last three to five years, including the Interactive Data** fixed income evaluations and reference data business, which we have invested heavily in, and SuperDerivatives**, which provides derivatives valuations. When we looked at our portfolio, we realized we have the building blocks for a world class index offering, so we discussed whether it was best to build those tools in-house or acquire an existing portfolio. The BofAML Index acquisition expanded our fixed income complex to 5,000 indices. The acquisition not only cemented our fixed income offering, but it also added equity benchmarks and 100 commodity indices, which complement ICE’s global futures markets. So we were able to acquire a highly regarded, robust set of indices in core growth areas for our customers at a time new solutions are being sought.
The TRADE: How do the new indices complement existing ICE and NYSE index offerings? How does the addition of the BofAML platform to this line-up change your competitive position in the index space?
LM: Adding the BofAML Indices to ICE’s suite of products really took us to a new level for our index offering. In the past, the NYSE® Index service was focused primarily on equity indices, which are important to our customers, but only cover one segment of the market. With the ICE® ***BofAML Indices, we now offer the second largest fixed income index portfolio in the market with $1 trillion benchmarked to it. So, whether customers want to talk about equities, fixed income or commodities, we have a multi-asset class index offering that market participants can benchmark against.
The TRADE: The new indices are powered by your reference data and evaluations offerings; how are you investing in these areas of the business to further support your index offering?
LM: Our evaluations, which are part of ICE Data Services’ Pricing & Analytics service, were already used to power the BofAML indices, but two areas where we have brought innovation to the market is around end-of-day evaluations and upgrading our reference data service. For evaluations, our Continuous Evaluated Prices service offers streaming prices throughout the day, bringing an all-new level of transparency to the fixed income market. We’ve also made a significant investment to expand our reference data offering both in terms of breadth of securities and geographies covered. This allows us to offer our customers a comprehensive service for pricing and reference data; a cornerstone of global fixed income markets.
The TRADE: What do you think is the biggest factor shaping the index landscape?
LM: As you know, passive investing has had an important impact on the equity markets. The move into fixed income indices and ETFs, which is still in its infancy, is starting to see early signs of growth, which is exciting. While fixed income ETFs account for a very small percentage of total fixed income assets (less than 1% in Europe and less than 2% in the U.S.). If the total allocation to fixed income were to decline, as money moves from active to passive strategies, fixed income ETFs will likely continue to see growth.
We’re also starting to see interesting developments with the launch of futures products against new indices, such as our NYSE®*** FANG+™ Index Futures. This contract leverages our new product development initiatives, index solutions and global feeds to offer an innovative way to manage risk in a basket of key technology companies. Additionally, to provide more transparency into the cryptocurrency market, ICE recently partnered with Blockstream to offer multi-asset and multi-venue data from cryptocurrency exchanges globally. Called the Cryptocurrency Data Feed, this new service captures nearly 65% of the global crypto trading volume.
Finally, we recently held a roundtable in London with some of our key index customers, to discuss the evolving index landscape – you can read insights and key takeaways from that event here.
* BofAML is a trademark of Bank of America Corporation in the United States and other countries.
** Since this interview was conducted Interactive Data and SuperDerivatives have been renamed to ICE Data Pricing & Reference Data, LLC and ICE Data Derivatives, Inc., respectively.
*** ICE and NYSE are trademarks of Intercontinental Exchange, Inc. and/or its affiliates. Other products, services, or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners