NASDAQ Buys RapiData

Yesterday, global exchange operator, NASDAQ OMX Group Inc. (NDAQ - Analyst Report) announced the acquisition of RapiData LLC, which offers government and economic data and news to a diverse group of market participants in the US. However, the terms and pricing of the deal remain undisclosed.

RapiData provides immediate access to the events regarding the US government and economic indicators that are integrated into algorithmic trading systems. Such news from readable-machine are imparted to trading firms and financial institutions, who seek to benefit from important information concerning macroeconomic factor, risk management solutions, long-range strategies for institutional investors as well as other liquidity opportunities and investments.

Hence, NASDAQ will now be able to deliver important news flow and status of key economic indicators directly from the source to the market clients through an electronic feed system. This service will not enhance the company’s information service efficiencies but will also help it to be ahead of the market, thereby perking up NASDAQ’s competitive leverage.

Additionally, the outstanding technical performance along with the recent acquisitions have enabled the company to enter new markets on a low cost and highly flexible platform, offering value addition to its clients and creating additional sales opportunities.

Particularly, the recent acquisition appears to be a meaningful one as it will help the company’s long-term competitive growth strategy, in its own small way, where arch-rival NYSE Euronext Inc. (NYX - Analyst Report) is on the verge of becoming one of the most powerful exchanges globally.

NYSE is undergoing the regulatory approval phase of its proposed merger with Frankfurt-based Deutsche Boerse in a $9 billion deal. Earlier this year, even NASDAQ along with IntercontinentalExchange Inc. (ICE - Analyst Report) had proffered a higher bid for acquiring NYSE, although it failed to woo NYSE and the regulators due to antitrust and multiple other issues.

Overall, we believe that the RapiData acquisition is a realistic and proactive approach on NASDAQ’s part. However, the company still needs to tackle grave issues concerning the ongoing competitive M&A activity and headwinds related to expenses, volume and pricing continue to limit the desired upside. These limitations reflect the pressing need to respond to the changing industry dynamics and dig in opportunities for gaining scale. 

Based on the pros and cons, currently we have maintained a Neutral stance on NASDAQ, carrying a Zacks #3 Rank, implying a short-term Hold recommendation.

On Monday, the shares of NASDAQ closed at $23.61, down 1.8%, based on weak global cues.

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