Cash Is King for Euronext and R3, But for Very Different Reasons

Euronext makes its play for FX through hefty M&A investment, while R3 announces a sizable intake from its own investors.

cash-tap-money

John reflects on this week’s news of Euronext entering the foreign exchange (FX) market, while R3 bounces back from some high-profile departures.

Almost exactly one year ago I wrote an article on how Dutch exchange group Euronext was embracing its independence and had earmarked a sizable fund for future acquisition.

This week Euronext made that acquisition public with the announcement that it would be entering the foreign exchange market through the purchase of a 90 percent stake in spot FX network, FastMatch.

Euronext had previously placed a high emphasis on its organic growth plans through internal technology development, with particular focus on its Universal Trading Platform, the bedrock of the exchange’s activities since its days of NYSE-ownership.

However, Euronext has now followed in the footsteps of peers like Deutsche Börse and Bats Global Markets by buying its way into a new market, one that has historically been dominated by the investment banks.

What struck me most about the deal was not its nature or valuation ($150 million), but that it was described by the group as a “bolt-on” acquisition that would “not consume any resource dedicated to the deployment of our Agility for Growth initiatives.”

Euronext had set aside a war chest of around €150 million to make its strategic goals a reality, but if the resources used for the FastMatch acquisition do not fall under that category, then surely we can expect to see more M&A activity in the future from the group.

Blockchain Bucks

Distributed-ledger technology (DLT) consortium R3 has suffered its share of setbacks over recent months, having seen high-profile institutions including Goldman Sachs, Morgan Stanley and, most recently, JPMorgan break ranks.

But the consortium has bounced back and this week announced a $107 million investment as a result of its series A fundraising round to accelerate development of its Corda distributed-ledger platform.

David Rutter, CEO at R3, called the level of investment “unprecedented” and that the groups was “on our way to becoming a new operating system for the financial environment.”

While the injection of cash is undoubtedly a big win for R3, it is perhaps too soon to be crowing too loudly: After all, it is only half of the original goal set by R3 for this investment round, which was later reduced to $150 million, a target that also was not achieved.

Raising over $100 million is nothing to be scoffed at, but it does need to be recognized that sell-side institutions will continue to have far more pressing investments to make than blockchain development in future, particularly as new regulation comes into force.

Despite the departures, R3 still counts most of the biggest hitters from the sell side among its members and is, at least in my view, the most credible blockchain-focused technology group out there. Let’s just keep that hyperbole at arm’s length for a while longer.

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