Why did Tudor buy Intercontinental Exchange?


Nov. 20 2020, Updated 5:25 p.m. ET

Paul Tudor Jones II in 1982 founded Tudor Investment Corporation, which is today a leading asset management firm headquartered in Greenwich, Connecticut. The Tudor Group, consisting of Tudor Investment Corporation and its affiliates, is involved in active trading, investing and research in assets across fixed income, currencies, equities and commodities asset classes and related derivative and other instruments in the global markets for an international clientele. Tudor has around $13.6 billion in assets under management. The investment strategies of the Tudor Group include, among others, discretionary global macro, quantitative global macro (managed futures), discretionary equity long/short, quantitative equity market neutral and growth equity.

It started positions in Apple Inc (AAPL), Beam Inc (BEAM), Infosys (INFY) and Intercontinental Exchange Inc (ICE). It sold Merck & Co (MRK) and Forest Laboratories Inc (FRX).

Abbreviated financial summaries and metrics for these securities are included below. Detailed analysis and recommendations require a subscription (more information at the bottom of the article).

Why buy Intercontinental Exchange Inc (ICE)?
Tudor acquired a small position (0.56%) in Intercontinental Exchange Inc (ICE), a leading operator of global markets and clearing houses.

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Intercontinental Exchange recently announced an agreement to acquire Singapore Mercantile Exchange (SMX) in an all-cash transaction. SMX operates futures markets in Singapore across metals, currencies, energy and agricultural commodities. It retains licences to operate as both an approved exchange and approved clearing house, providing ICE with exchange and clearing infrastructure in Asia for the first time. It said the deal is an important step in ICE’s growth trajectory as it looks to expand its customer base and markets in Asia by establishing a local exchange and clearing presence. In recent years, Asia-based trading activity in its benchmark energy and interest rate products has been rising as the region increases in importance in global markets.

It saw a strong 3Q 2013 with significant operational and strategic initiatives that provide for continued long-term growth. It reported revenues of $338 million, an increase of 5% from the third quarter of 2012. Consolidated net income was $141 million, up 8% from 3Q 2012, and diluted earnings per share (EPS) increased 7% to $1.92. It said the completion of its acquisition of NYSE Euronext will expand its reach in important asset classes including interest rates and equities. It expects to conduct an IPO for the Euronext group of Continental European exchanges as a stand-alone entity, subject to market conditions and regulatory approvals. The company has a combined market capitalization of $23 billion. The combined company operates 16 global exchanges and five central clearing houses, and is on track to be the leader in global capital raising for the second consecutive year. It also announced in November that post the separation of the Liffe and Euronext businesses, which is expected to take place in 1Q 2014, ICE will begin to transition Liffe contracts to the ICE trading platform and to the ICE Futures Europe exchange, starting with agricultural commodity contracts in the summer of 2014. Liffe equity derivatives contracts, including indices and single stock futures and options, and interest rates contracts are expected to transition in the third and fourth quarters, respectively. It is anticipated that the Liffe operations will be fully integrated with ICE Futures Europe by the end of 2014.

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ICE expects 2013 adjusted consolidated expenses to increase in the range of 1% to 2% compared to 2012 adjusted consolidated expenses, versus prior guidance of an increase in the range of 2% to 3%. Its board declared a quarterly cash dividend of an aggregate $75 million for the fourth quarter of 2013. The stock is up 80% YTD.

Born in Memphis, Tennessee, Jones then went to University of Virginia, earning an undergraduate degree in economics in 1976 as well as a welterweight boxing championship. He then went on to work for Eli Tullis, a successful cotton speculator at the New York Cotton Exchange. One of Jones’ earliest and major successes was predicting Black Monday in 1987, tripling his money during the event due to large short positions.

As of March 2013, founder Paul Tudor Jones II,  was estimated to have a net worth of USD 3.6 billion by Forbes Magazine and ranked as the 108th richest American and 376th richest in the world. With this financial success he founded the Robin Hood Foundation, a philanthropic organization mainly backed by hedge fund operators.


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