Nasdaq to Buy Options Exchange Operator ISE for $1.1 Billion

• Just as the London Stock Exchange and Deutsche Börse Group are in a tango over a potential merger, Deutsche Börse officials take a side step and agree to sell International Securities Exchange Holdings, Inc. (ISE) to Nasdaq for a total cash consideration of $1.1 billion
• ISE’s exchanges serve as the venues for more than 15% of trading in U.S. options

Nasdaq Inc. agreed to buy options-exchange operator International Securities Exchange for $1.1 billion, in a deal that gives it control of nearly 40% of the U.S. options market.

Nasdaq, which is buying ISE from Deutsche Börse Group, expects to complete the deal in the second half of 2016 and fund it with a mix of debt and cash on hand.

ISE operates three electronic options exchanges—ISE, ISE Gemini and ISE Mercury—which serve as the venues for more than 15% of trading in U.S. options. Nasdaq operates Nasdaq PHLX, Nasdaq Options Market and Nasdaq BX Options.

As part of the transaction, Nasdaq will gain an additional 20% stake in the Options Clearing Corp., for a total position of 40% in the world’s largest equity derivatives clearing corporation.

Options trading has grown more competitive in recent years. Last year, BATS Global Markets Inc. launched EDGX options, and MIAX Options Exchange struck an equity rights deal with several major firms, predicting the move would triple its market share.

The London Stock Exchange has said it is in advanced talks with Deutsche Börse about a so-called merger of equals that would value the combined company at about $28 billion. Intercontinental Exchange Inc. and CME Group Inc. are also considering bids for the LSE.

For its part, Nasdaq has transformed from a U.S.-focused exchange operator to a global business that includes markets in the U.S., Canada and the Nordic region, as well as a suite of businesses that include investor and public relations, technology and data.