Whenever the trading and exchange space wades into the IPO arena, people take notice. Markit’s information services, well ingrained into the derivative and bond markets, is now looking to raise over $1 billion on its IPO.
Markit, launched in 2003, is looking to raise capital for its backers, a group of large banks and institutions, but not take proceeds from the offering for itself. It’s an unusual set up, but not that uncommon. Even with this backdrop, the question for any investor and participant in Markit’s space, is what are the firm’s prospects going forward?
In Markit’s SEC filing, the firm says it plans to capitalize on the regulatory and compliance environment by offering services there along with risk management, disclosure and analytics services. It also believes there is much growth geographically.
Markit’s finances have shown consistent growth, with revenues rising from $762.5 million in 2011, $860.6 million in 2012 and $947.9 million last year. Operating profits have risen as well, from $156 million 2011, to $224.7 million in 2012 and $230.1 million last year. So can Markit keep it going? That is a key question and depends on where the derivatives industry is heading.
The Bank for International Settlements (BIS) reported in its March 2014 report that the overall size of the derivatives industry, including OTC and exchange traded products, is rising. OTC markets totaled $710.1 trillion notionally in December 2013, up from $692.9 trillion in June 2013, and $632.6 trillion in December 2012, while the total global exchange notional value totaled $25.9 trillion in December 2013, up from $24 trillion in December 2012 and $22.9 trillion in 2011. The notional value of options also has grown to $38.6 trillion in December 2013, from $30 trillion in December 2012 and $35.4 trillion in December 2011.
If the OTC and exchange space continues to grow, and the regulatory environment continues to evolve around it, Markit may be well positioned to expand with it.
Markit’s F-1 Filing can be found here: http://www.sec.gov/Archives/edgar/data/1598014/000119312514181899/d661473df1.htm