The International Securities Exchange (ISE) has acquired the intellectual property rights and assets of derivatives risk transfer platform Longitude. Terms of the transaction, which has the full support of Longitude minority stakeholder and customer Goldman Sachs, have not been disclosed.
Longitude licenses its patented Parimutuel Derivative Call Auction (PDCA) technology to investment banks and other capital markets firms. Financial intermediaries use PDCA technology to supply derivative and risk management products to their customers without taking on the market exposure customarily associated with trade facilitation.
Following the acquisition, the business will become an operating unit of ISE, which will retain majority-ownership in partnership with Goldman Sachs, which is increasing its pre-existing minority stake.
Goldman Sachs has been using the Longitude platform since 2002 to clear risk and build liquidity for a range of auction products. Currently the products offered include options on economic data in partnership with the Chicago Mercantile Exchange and options on certain energy market statistics in partnership with Icap Energy and the New York Mercantile Exchange. Upon closing, the new unit will service these existing auction markets.
ISE says the business will report to its corporate initiatives division, which is headed by Thomas Ascher, chief strategy officer.
Commenting on the deal, Ascher says: "We are committed to leveraging Longitude's proprietary, patented technology to support and build upon the exciting suite of products which have already been developed."