The second largest stock exchange operator in the world, the Nasdaq, has announced that it will acquire eVestment for $705 million. eVestment Alliance LLC is a cloud-based content and analytics providing company that helps institutional investors by monitoring market shifts and assisting in investment decisions. The deal will be paid for by a combination of cash in hand and debt, and should be final by the end of the fourth quarter.
According to Nasdaq’s Chief Executive Officer, Adena Friedman, this deal will help strengthen the exchange operator by enhancing its technology and service offerings, especially in its market data segment. Nasdaq’s market data business showed a revenue increase of 7.5% in the second quarter of June, 2017, and contributed 24% of the overall revenue. With 2000 clients, including 92% of the biggest asset managers, eVestment will boost Nasdaq’s market data segment. Early morning trading showed a slight drop of 1.8% to $74.02.
eVestment provides the huge database for traditional as well as alternative investment strategies. In fact, the company has the largest data base of such strategies in the world today, with 2,800 individual data points on more than 74,000 investment vehicles such as bonds, stocks, options, futures, annuities, collectibles, mutual funds and even ETFs. The role of companies like eVestment is becoming more critical to markets as more and more companies are relying on independent advanced analytics data to make informed decisions about when and where and how much to invest.
“Nasdaq” is actually an acronym for “National Association of Securities Dealers Automated Quotation System”. In 1960, the Securities and Exchange Commission (SEC) conducted a study that the sale of over-the-counter (OTC) securities which were not listed on any stock exchange was disorganized. It mandated that the OTC market should be automated. The NASD – National Association of Securities Dealers – were given the task of automation, which started in 1968. The first trade was made on February 8, 1971, making the Nasdaq the first ever electronic stock market.
Unlike the NYSE and other stock exchanges, the Nasdaq does not have a physical location. It is actually a telecommunications network where trading takes place directly between investors, buyers and sellers through a network of companies electronically connected to each other.
Another way that the Nasdaq has grown is in the perception of market makers (investors, buyers and sellers). The exchange operator is considered more of a technology market, with a lot of the internet and electronics related companies preferring to trade here.
The cost of listing and other requirements also makes a difference to which stock exchange a company will choose to list with. One is the price. The Nasdaq is pretty competitive in its listing pricing. For example, the number 1 exchange operator in the world, the New York Stock Exchange (NYSE), charges a company $500,000 for it to be listed on the exchange. Nasdaq, on the other hand, charges about $50,000 – $75,000 for a listing. Annual fees for NYSE are $500,000 while Nasdaq’s fees are $27,500. Thus, the Nasdaq automatically tends to attract the start-ups and newer companies. This makes the Nasdaq a more volatile and growth oriented exchange, while the NYSE is considered less volatile. Today, the Nasdaq exchange has more than 4000 companies listed, which are tracked on the Nasdaq Composite index.
The co-founder CEO of eVestment stated that their company’s leadership is very excited about joining the Nasdaq team. They are looking at this deal as a synergistic venture, where their core competence and Nasdaq’s expertise in technology and global reach will create new opportunities for growth.