So, in the wake of NYSE Euronext’s failed merger with Deutsche Borse, executives at the exchange group are clearly embarking on a Plan B. Part of that is the deal it announced on February 16, which will see it take a 25% stake in Fixnetix, a provider of co-located, managed services for low-latency market data, market access and pre-trade risk management. The “strategic investment” – which allows for a complete acquisition down the road – will see the two collaborate to offer their respective services on a global basis.
Financial terms of the deal were not disclosed, though my esteemed colleagues at the Financial Times (I used to work there, you know) reckon the stake values Fixnetix at £100 million. Apparently, both sides already know what the financials will be should NYSE gobble up the outstanding 75% during the next three years.
While the NYSE – through its NYSE Technologies unit – and Fixnetix will be run independently, the aim is to collaborate to offer customers a full, complementary suite of services. Even though there is some overlap in what each provides, both companies share a general vision of making it “frictionless” for trading firms to do business in different and new markets – through managed services that do not require those firms to invest heavily upfront to begin, and later expand, operations.
For Fixnetix, NYSE’s investment and global presence – particularly in Asia where demand for its services is high – will help it accelerate delivery of its services in new markets. Time to market is also an attraction for the NYSE, which is planning a global rollout of its Liquidity Hubs, extending its reach beyond New York City, London, Tokyo and Toronto. For the exchange, even with its deep pockets, it’s basically a case of buying will be faster than building – especially in Europe.
For sure, the combined NYSE Technologies/Fixnetix portfolio – covering cloud computing to FPGA-accelerated risk management – should provide a comprehensive – and attractive – offering for customers that have had to take a more piecemeal approach to service procurement to date, or perhaps throw their lot in with Thomson Reuters.
For NYSE Technologies and Fixnetix, the risk is that the two operations will not see the strategic prize for the inevitable turf skirmishes that will result from service overlap – which will probably lead to confused customers going elsewhere. If that does happen, one might expect the NYSE to exercise its buyout option sooner than later, though that could also happen if things are going swimmingly.