Purchase of volatility benchmarks allows exchange group to target growth of fixed income ETFS

Intercontinental Exchange will acquire Bank of America’s MOVE indices in the latest example of an exchange group expanding its data business after rival operator the London Stock Exchange Group agreed to purchase Refinitiv.

The MOVE benchmarks track volatility in the fixed income markets. The most popular, an index that tracks volatility in US government bonds, is the fixed income equivalent of the Vix benchmark that is commonly known as the stock market’s “fear gauge”. Terms of the deal, announced Monday, were not disclosed.

The flagship bond benchmark, also known as the Merrill Lynch Option Volatility Estimate, dates back 30 years and measures US interest rate volatility based on options pricing for government debt with maturities of two, five, 10 and 30 years.

The suite of indices also includes a benchmark that measures volatility in US interest rate swaps. The deal reunites the MOVE indices with the

broader suite of fixed income indices ICE acquired from Bank of America in 2017.

The deal is in part motivated by ICE’S desire to target the growth of fixed income exchange traded funds, which this year surpassed $1tn in assets, said Lynn Martin, president and chief operating office for ICE’S data services division.

“This acquisition really rounds out the offering that we have established around fixed income risk management,” Ms Martin said. “The MOVE index provides a unique way for firms to provide their views of monetary policy at a very interesting time in fixed income markets.”

The purchase comes as exchange operators compete to expand further into the business of selling data and analytics rather than matching buyers and sellers. Indexing in particular has boomed in recent years as investors have moved away from actively managed funds to passive portfolios that follow an index. This has swelled the indexing business to $3.5bn last year from $2bn in 2013, according to Burton-taylor International Consulting.