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Talking Reference Data with Andrew Delaney: The Billion Dollar Startup

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Last year was a busy year from Standard & Poor’s, or at least for the part of Standard & Poor’s that is now known as S&P Capital IQ. President Lou Eccleston – who cut his teeth in our industry as part of the core management team of Bloomberg, where he headed sales for many years – oversaw no fewer than three acquisitions in 2012, all of which have a bearing on the landscape within our market segment.

“I like to call S&P Capital IQ a $1 billion start-up,” he quipped in these very pages back in May.

As a loyal reader of Reference Data Review, you’ll have read all about them, as it were. To remind you, here’s the list in chronological order: In February, it acquired risk specialist R2, swiftly followed by low-latency delivery platform QuantHouse in April; and in July it acquired CMA.

I was lucky enough to catch up with Lou just before the holiday break. S&P Capital IQ were generous enough to lend us their recording studio. And the result is a fairly wide-ranging, yet succinct, interview in which Eccleston explains the whys and wherefores of the 2012 spate of acquisitions. You can watch it here.

While we were familiar with all of the companies involved, we have to confess that we didn’t see these acquisitions coming (unlike, say, Sungard’s acquisition of XSP announced this week: XSP’s relentless social media programme gave the game away long ago, and Sungard is ALWAYS a usual suspect). So it was good to hear from the horse’s mouth the rationale behind them.

R2 (pronounced ‘R-squared’ and not ‘R-two’, as you’ll hear in the video) brings a key risk functionality to the table. According to Eccleston, part of the compelling reason to acquire was the team behind R2’s risk analytics, which has been amalgamated into the S&P Capital IQ structure, giving the group a risk capability to complement its existing services that it previously lacked.

QuantHouse is a provider of low-latency data delivery infrastructure, and as such was the acquisition that took us most by surprise. Aside from the value of the company’s product offerings as a business line within the low-latency space, Eccleston explains QuantHouse’s role in terms of its position within the price-discovery spectrum, with listed securities like equities, futures and options shifting toward the kind of ultra-low-latency delivery afforded by QuantHouse and less liquid, over-the-counter instruments – derivatives, structured products and the like – requiring a more contemplative approach to valuation.

With QuantHouse adding to S&P Capital IQ’s arsenal at the most visible end of the liquidity spectrum, another acquisition – that of CMA – bolstered the company’s position within the hard-to-price segment. CMA – previously owned by exchange operator CME Group – specialises in valuations for illiquid securities like OTC derivatives, and often scores high in our very own A-Team Performance Benchmarking rankings of valuation services providers.

As Eccleston points out in our interview, the whole is intended to be greater than the sum of the parts. Adding these capabilities to existing ones – in particular the original Capital IQ desktop, which can become the conduit for melding S&P Capital IQ’s services into a comprehensive portfolio, risk and data service – presents Eccleston and his team with the opportunity to make an impact on practitioners’ thinking as they move to address the raft of regulatory requirements that will be coming into force in 2013 and beyond.

If 2012 was busy for Eccleston, 2013 may yet be busier.

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