ICE Looks to Buy All of MERS

I mentioned this in the previous post but it’s worth discussing in more detail. Intercontinental Exchange (ICE) already owns part of Mortgage Electronic Registration Systems, also known as MERS, but we don’t know how much. ICE is currently planning to buy the whole thing. A deal may come in the next few weeks.

What ICE has done successfully is buy analog markets and make them digital. That looks to be their plan with MERS, the system that tracks millions of mortgages.

The mortgage industry is still mostly on paper. The financial crisis has stalled any serious effort to move the industry to the wonderful paperless word.

One of the problems it that MERS has been under special regulations due to lawsuits surrounding the financial crisis. That’s kept most buyers at bay, but that looks to be ending which, in turn, is drawing ICE’s interest.

The Financial Times article quotes one observer, “If I had to guess, what is probably their long-term play is to create the New York Stock Exchange for mortgages.” MERS registers 5.5 million new loans every year which is about 75% of all new mortgages.

Here’s the FT on ICE:

Most financial exchanges were built in centuries past, when brokers and traders agreed deals with shouts and hand gestures. Intercontinental Exchange was formed in May 2000 as the dotcom bubble was losing air.

Entrepreneur Jeffrey Sprecher set up the company as an all-electronic marketplace for gas and power. ICE received an inadvertent assist from the energy trader Enron, whose rival online platform imploded when the company did. “After the collapse of Enron, our revenues took off,” Mr Sprecher has said.

A lack of attachment to physical trading venues marked its growth. In 2001 it acquired International Petroleum Exchange, the largest energy futures exchange in Europe. After shutting down the IPE’s floor in 2005, volumes in flagship crude oil contract Brent have grown eightfold.

ICE also shut down the trading floor after purchasing the New York Board of Trade, an exchange for cotton, sugar and other soft commodities, in 2007. The Winnipeg Commodity Exchange, a Canadian canola seed venue, was acquired by ICE and incorporated into its US-based electronic futures platform.

In 2013 ICE made its largest-ever acquisition with the purchase of the NYSE Euronext. The prize justifying its $10bn price tag was the all-electronic Liffe futures exchange in London, but the deal also gave ICE ownership of the New York Stock Exchange — whose ornate floor has been kept open.

Posted by on October 2nd, 2018 at 12:53 pm


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