Once again, IMD has a truncated deadline because of UK holidays—this time to celebrate a Royal Wedding. But William and Kate’s nuptials aren’t the only union taking place now. Throughout history, royal families from different nations would marry royals from other countries in an effort to create treaties and ensure peace. However, the other “royal wedding” being planned right now—that of NYSE Euronext and Deutsche Börse—appears to be creating the opposite result.
Nasdaq and the IntercontinentalExchange not only united against the deal, but then proceeded to crash the wedding party and make a pass at the bride. Having been rebuffed twice by NYSE’s board, Nasdaq and ICE last week issued a statement warning NYSE stockholders to “be highly skeptical” about the benefits offered by the NYSE-Deutsche Börse proposals, calling into question the expected synergies and claiming that “NYSE Euronext is more focused on protecting the transaction than its stockholders,” begging the question of why Nasdaq and ICE would continue to pursue a business if they have such concerns about it.
But let’s not get distracted by the royal families of the exchange world: Last week, datacenter hosting and cloud computing services provider Savvis announced its sale to Monroe, Louisiana-based telecom, network and internet provider CenturyLink in a $2.5 billion cash and shares deal. The acquisition—which is expected to close in the second half of this year—will see CenturyLink integrate its own network and hosting services with Savvis, which will continue to be run as a separate business “primarily” by Savvis’ existing management.
It should come as no surprise that companies like CenturyLink would be interested in a vendor like Savvis, which serves multiple markets besides financial services: Aside from a projected $70 million in synergies, the deal gives them an entry into the low-latency networking, co-location and exchange hosting space, which remains a hot topic for the capital markets, as evidenced by other deals in the news last week. For example, in the low-latency space, Japanese datacenter provider KVH and Singaporean telecom vendor SingTel announced a ultra-low-latency connection (with latency of 67 milliseconds) between Tokyo and Singapore, to support high-frequency trading between the exchanges, while undersea cable provider Hibernia Atlantic—which recently announced its own low-latency efforts in the region (IMD, April 25)—unveiled Hibernia Secure, a service that re-routes traffic over secondary routes in the event of issues with primary routes, demonstrating the value that end-users place on reliability and the service levels they expect and demand.
And with data volumes continuing to rise while trading algorithms continue to break trade sizes—though larger than in 2008—down into retail-size orders, these high numbers of small orders place increased pressure on financial infrastructures, making managed network and hosting services and cloud models more appealing, while also driving demand for sophisticated analytics that can navigate fragmented markets polluted with “noise” to find true liquidity—which, as exchange mergers create bigger, more global marketplaces, may be more challenging to identify.
But one shared interest in the flavor of the month does not make a happy long-term marriage. Not every royal wedding ends in everlasting bliss, and sometimes the prince and princess decide they are better off apart—Thomson Reuters announced plans in its Q1 financial results last week to sell its Portia portfolio management solution and its Enterprise Risk business, which includes the Kondor risk management tool, deeming these non-core to its main business. Thomson Reuters expects to generate $1 billion from the divestments, along with other assets from its legal, education and tax businesses—plenty enough to throw a nice party to celebrate the Royal Wedding.
Dan DeFrancesco makes his return to the podcast to talk about bitcoin futures and why he wanted to start this podcast in the first place.Subscribe to Weekly Wrap emails