Opening Cross: Out With the Old, In With the Older

Max Bowie, editor, Inside Market Data

From Jan. 1 next year, there will be a familiar face heading a company bearing the Thomson name: Jim Smith, who Thomson Reuters announced last week will displace current chief executive Tom Glocer, and who led Thomson Corp. prior to its acquisition of Reuters in 2008.

For some time, there have been whispers of the vendor’s board wanting to reinstall the old guard of former Thomson execs in the top roles, which were mostly occupied by Reuters staff immediately post-merger. However, the financial markets have soured over the past four years, and Thomson Reuters has struggled to capitalize on the combination of the former Reuters and Thomson Financial businesses while rival Bloomberg has continued to increase its screen count.

Some thought this came to a head earlier this year, when the vendor let go a number of senior staff, including Devin Wenig, CEO of the vendor’s Markets division. But in recent months, the speculation increased again, with sources saying that former Thomson Corp. CEO Smith seemed poised to take the reins, having risen from head of the vendor’s Professional division to overall company chief operating officer.

Certainly Glocer’s departure is the most significant move in the vendor’s efforts to revitalize itself and claw itself back to the top spot in the data industry. But can the veteran Smith—who has worked for Canada-based Thomson since 1987 while Glocer joined Reuters in 1993—deliver on the promise of change?

Also promising change is Canada’s Maple Group, the would-be purchaser of exchange group TMX, though the Canadian Competition Commissioner has raised concerns about the purchase—in conjunction with Maple’s other proposed acquisitions of securities depository CDS Clearing and Depository Services and the Alpha ATS—with respect to trading, clearing and settlement in the Canadian capital markets.

Maple and TMX argued their case last Thursday, Dec. 1 at the Ontario Securities Commission, stressing the importance of CDS adopting a for-profit business model based on successful exchange demutualizations, which—combined with TMX—would give it scale and the ability to create new products, and increase the Canadian market’s competitiveness as a whole, making it a more attractive investment destination.

But with 74 percent of the proposed combination to be owned by Canadian pension funds, banks, dealers and others, this model seems to owe a big nod to the member-owned exchanges of yesteryear. And while dealer-owned markets work well in some areas, dealers can be fickle. And when they lose interest, the venues lose flow and value.

However, the competition commissioner’s concerns reflect a trend of domestic authorities towards a model from yesteryear, too. That’s not to suggest they are backward, but merely that in an uncertain economic climate, regulators appear more circumspect about the impact to domestic business of major exchange mergers than others have in the past—for example, the Australian regulator scuppered a proposed merger between the Singapore Exchange and the Australian Securities Exchange earlier this year, while NYSE Euronext and Deutsche Börse recently submitted a series of concessions to the European Commission’s director general for competition, designed to allay the regulator’s concerns about the impact of the proposed mega-merger on European derivatives trading and clearing.

After the credit crunch, the financial crisis and the Flash Crash, some might be forgiven for thinking that “in with the older” wouldn’t be such a bad thing. But as vendors and exchanges alike look for the way forward, “in with the new” is assured instead—new faces, new market landscapes, and plenty of new opportunities and challenges for the data industry.

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