The Chicago Board Options Exchange badly wants a systems upgrade. The company intends to acquire Bats, the Kansas-based operator of foreign exchange and equity markets that listed just six months ago (after botching an earlier attempt four years before). Cboe wants to move both companies’ trading activity on to the target’s technology platform. There must surely be cheaper ways to reboot.

CBOE has long been valued favourably in comparison with competitors CME or Nasdaq, but because investors thought it might be prey rather than a predator. Multiples should now contract, as the deal proves that assumption false.

The companies claim the combination would produce $65m of likely cost savings after five years, 15 per cent of last year’s combined operating costs. But this is high, given the rather disjointed nature of the businesses. Against this, CBOE is buying earnings per share growth at a time when it can borrow cheaply. Analysts predict that Bats’ earnings per share could grow at double CBOE’s forecast 8 per cent between 2015 and 2018, and CBOE has no debt on the balance sheet.

A more likely motivation is that CBOE wants the deal to throw obstacles in the way of those gazing hungrily at its own revenue pools. Nasdaq or CME might still interlope, but they must decide quickly, before the acquisition goes through.

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