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The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Bordeaux Dispatch – Extending the Tentacles

Actually, I used Bordeaux to get your attention. I write this blog from rural Perigord – the village of Bourdeilles, to be exact – which sits close to some wine appellations that are regarded as Bordeaux, like St. Emilion and Pomerol.

So, yes, it’s a stretch. But there is a theme at play here.

Bourdeilles sits in the Perigord area in the department of Dordogne in the region of Aquitaine. It’s an area steeped in the history of dynasties, from the court of Mary Queen of Scots to the illustrious Medicis.

And it’s this idea of dynasties that’s lending credence to word from England that the London Stock Exchange is once more on the acquisition trail. More: it’s contemplating how it can add execution and order management into its growing suite of technology offerings.

And this is where the dynasties element comes into it: the company on our messenger’s lips is Fidessa, home to several agents of the former Primark dynasty, from whence the LSE’s David Lester hails. (It’s a bit of a stretch – Ed.)

Lester, you will recall, has been tasked with taking on the business of Turquoise, the exchange’s majority owned dark/lit hybrid trading platform, whose capabilities are to be merged with those of the LSE’s former Baikal dark pool. A key component of Baikal before the Turquoise acquisition was its smart order routing capability, to be provided by Fidessa, and expressly retained in the post-Baikal Turquoise.

How far the dynastic link via Primark draws the two together is (admittedly) questionable. But the base business logic is compelling. From where the LSE sits, technology services will become a more important contributor to its bottom line, as it has already indicated through its recent acquisitions of Turquoise and of MillenniumIT.

Its closest rival, NYSE Euronext, has launched a significant technology-based business – NYSE Technologies – through a series of acquisitions (TransactTools, Wombat and others). Moreover, NYSE Technologies is extending its own tentacles out to the marketplace via its Market Access Gateway, Common Customer Gateway and Risk Management Gateway offerings.

Fidessa could give LSE tentacles into the marketplace, both on the sell side via the original Fidessa OMS platform, and on the buy side via the Fidessa Latentzero system. Between them, the two Fidessa platforms and their various versions link some 22,000 market professionals to a broad range of market venues. Those links could be use to streamline market access, add pre-trade risk controls, offer smart order routing and generally offer value-added capabilities that improves the LSE’s overall stickiness.

For the LSE, that makes those tentacles nothing short of tantalizing.

Too much vino? Let’s see.

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