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The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

How Buying Fixnetix Is Truly a Risky Business

Hot on the heels of Colt’s protracted courtship of MarketPrizm comes yet another corporate action in our beloved low-latency infrastructure segment. This one caught us by surprise, but not because it was unexpected. It’s been expected for so long that we’d forgotten about it, to be honest.

That Fixnetix was ‘for sale’ has been a part of normal life since – I don’t know – since when many of us first heard of the company; that and the longstanding perception that the company is nothing more than a Wombat reseller.

Clearly the latter can’t be the case, as Fixnetix has found a buyer. And this is where the surprise comes in.

Yes, it’s Markit.

No, seriously. It’s Markit. The company that just bought QuIC, the risk management people, is set to sign on the dotted line for Fixnetix, a provider of low-latency connectivity services.

I’m not sure I get it yet, either. But I have a hunch what this is about, and it’s all about risk.

Smarting – for quite some time – about this market perception as a pure infrastructure play, Fixnetix has been working hard to add value-added services to its offerings. You may recall that it quashed the Wombat perception with the acquisition of Market Systems Technology, an old-school ticker plant developer that once built an equities data feed business for Telerate no less.

And yet we continued to be scolded for referring to the company has a high-end market data distribution platform that was highly successful in helping prime brokers offer technology services to their hedge fund clients. There was more – so much more – to the offering. And this, it seems to me, is the risk bit.

For high in the hierarchy of what Fixnetix has brought to the table is a set of pre-trade risk management capabilities that help clients operate in the high-speed multi-venue marketplace. Think FTEN, Mantara and the like. And as our trusty readers will know, this is a very hot item, what with SEC Rule 15c-3-5 and whatnot.

So, our theory is that Markit is on a roll to construct a risk workflow suite of offerings, with QuIC at its core, its own valuations and other risk-related information supplementing, and now Fixnetix completing the pre-trade risk circle.

Now, we’ve been wrong before. But we don’t think we are on this one.

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