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A landmark £1.4bn deal between Microsoft’s Satya Nadella and London Stock Exchange Group’s ebullient CEO David Schwimmer was finally closed last weekend in a flurry of online video calls between the two leaders.
Once in control, Microsoft’s top commercial executive, Judson Althoff, drew the red eye to London for a handshake on the steps of St Paul’s Cathedral for the groundbreaking deal between Europe’s leading stock exchange and financial data repository and America’s £1.5 trillion computer and software giant.
The new relationship did not just happen. The London Stock Exchange and Microsoft have spent hours behind the scenes, involving hundreds of engineers on both sides of the Atlantic, to bring the two companies’ ambitions closer together.
Deal: David Schwimmer of the London Stock Exchange, left, and Judson Althoff
The conversations “started more than a year ago and included numerous virtual conversations on Teams between experts,” Schwimmer told The Mail on Sunday. For the former Goldman Sachs banker, it is another transformational deal following the American’s successful acquisition of Refinitiv, the former data and trading arm of Reuters, last year.
In a post-Brexit era where so many UK businesses have shown reluctance to invest, it again needs an overseas entrepreneur running a major UK company to recognize the city’s global leadership as a financial hub – one that is now ready is to take advantage of the freedoms afforded by the UK’s new status in the world. Rather than allow itself to be a seven-stone weakling, up for grabs by potential buyers, the LSE has vigorously rejected all new entrants in two decades.
Successive chief executives Dame Clara Furse and Xavier Rolet have largely steadfastly opposed the pursuit of Deutsche Borse, Nasdaq, the Hong Kong Stock Exchange, choosing to go it alone.
Under Schwimmer, the LSE has grown into a £45 billion behemoth that is valued higher than any of Britain’s main banks, with the exception of the beleaguered HSBC.
There are those who are eager to drag the crown of London’s trade and information center from its head. Data rival Bloomberg trumpeted that Euronext and the Paris Stock Exchange had overtaken London in spot trading in stocks. Schwimmer is annoyed by exaggerations based on sloppy data.
But will the French CAC All-Tradable index really overtake the FTSE All-Share?
He tells me the Paris claim was based on “just a few trading days in November 2022.” Those arguing for Paris’ superiority have “disregarded international funds, ETFs (ExchangeTraded Funds), IPOs (Initial Public Offerings – or IPOs) on the LSE, capital raises and much more,” he argues. As the European Union focuses on cash trading in the 20th century and launches a campaign to repatriate some derivatives trading and clearing to the mainland, the LSE is breaking new ground.
The deal with Microsoft not only puts the LSE in the ‘cloud’, making it more flexible and efficient, but also accelerates London’s processing and data analytics capabilities. The Microsoft alliance parallels 21st Century deals in the US between Nasdaq and the Chicago Mercantile Exchange with Silicon Valley, giving them access to the cloud and best-in-class technical processing.
At the outset, the LSE has agreed to a relatively modest $2.8bn (£2.3bn) spend on its cloud computing capacity over the next decade. Microsoft believes that at least $5 billion can be harvested.
The partnership with Microsoft also allows the LSE to step up its battle against Bloomberg and other data providers in the trading chambers and on the desks of investment bankers, hedge funds and brokers through Refinitiv. It is also designed to spit out new products.
As former Wall Street banker and author Michael Lewis pointed out in his book Flash Boys, speed is of the essence and provides an advantage in financial trading. The arrival of Big Tech in market transactions, data and analysis is a new frontier.
It’s been a long journey for the LSE from its origins in the coffee shops in the narrow streets of the Square Mile in 1698. The stock market itself has become more of a complement to its ability to process, analyze and analyze financial data around the world. and merge. planet.
The LSE also has opportunities for foreign exchange, fixed rate and derivatives trading in addition to Europe’s dominant site for settling complex transactions – the London Clearing House.
Clearly the world of cash trading is at the heart of what London is all about and Schwimmer takes credit for winning its fair share of IPOs and raising capital in a year when markets around the world suffered under extreme volatility.
Schwimmer and the LSE, with a Microsoft tech now on the board, can truly claim to be the city’s first institution to take advantage of new freedoms, reaching across the Atlantic and into the Far East.
Silicon Valley’s arrival in the world of exchanges and financial data may give regulators concerned about the power of big data pause. But the rocket to act in the cloud has already left the launch pad.
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