ESpeed and Cantor Fitzgerald are to acquire a stake in Canadian inter-dealer broker Freedom International Brokerage, the balance of which is to be owned by the six largest investment dealers in Canada: BMO Nesbitt Burns, CIBC World Markets, Merrill Lynch Canada, RBC Dominion Securities, Scotia Capital Markets and TD Securities.
Freedom is the leading inter-dealer broker of Canadian fixed income products, foreign exchange and other capital market products, transacting an average of 50% of trades in these products in Canada. New York-based eSpeed currently transacts over $150 billion of fixed income instruments daily across its electronic dealing network.
Under the terms of the agreement, eSpeed will issue 310,770 shares of Class A Common Stock and will receive a 10% indirect interest in the profits of Freedom without any loss exposure. In addition, eSpeed will issue 400,000 warrants, which will be allocated to the Freedom owners over the next three years as an added incentive for the investment dealers to trade on the eSpeed electronic trading platform.
ESpeed is to provide technological infrastructure, access to eSpeed's private network and software for the Canadian markets, and will receive 100% of all fully electronic transaction revenues and 35% of other revenues.
Peter McRae, who will continue in his current role as president and chief operating officer of Freedom, says: "ESpeed's leading edge technology not only allows Freedom's customers to benefit from the speed and efficiencies of their electronic system in the Canadian market, but also provides access to a broad range of other global products through a single, user-friendly platform."