Microsoft to Buy 4 Percent Stake in London Stock Exchange
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Microsoft to Buy 4 Percent Stake in London Stock Exchange

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Antonio Gozain By Antonio Gozain | Senior Journalist and Industry Analyst - Mon, 12/12/2022 - 11:55

Microsoft will buy a 4 percent stake worth US$2 billion in the London Stock Exchange (LSEG) as part of a deal to work together on data analytics and cloud technology.

The deal will bring a “meaningful” upside to revenues after 2025 from selling more of its existing products through Microsoft applications to grow the customer base, in addition to better pricing of products, said LSEG. “It is a long term partnership. In terms of the products we will be building together, I would expect our customers to start to see the benefits of that 18 to 24 months out and we will continue building from there," David Schwimmer, CEO, LSEG, told Reuters.

As part of the deal, LSEG made a contractual commitment with Microsoft to spend a minimum of US$2.8 billion in cloud-related products and services over the term of the partnership. The initial focus will be on delivering interoperability between LSEG Workspace and Microsoft Teams, Excel and PowerPoint, and to develop a new version of LSEG’s Workspace, said Microsoft.

Microsoft and LSEG will continue working to potentially shift trading or clearing activities to the cloud, said Schwimmer: “It is in a more exploratory phase at this point, but we will update the market as that continues to develop." Microsoft's purchase is expected to complete in 1Q23.

Over the past years, big global cloud companies, such as Microsoft, Google, Amazon and IBM have deepened ties with financial companies, prompting regulators to scrutinize the links more closely, reported Reuters. In November 2021, Google said it would invest US$1 billion in CME Group to move the US derivatives exchange’s trading systems to the cloud. Later that month, Nasdaq and Amazon announced a similar partnership.

Regulators’ concerns are based on the over-reliance of financial firms on too few cloud providers. If a provider serving many clients went down, the disruption could be devastating. When asked if LSEG had ensured that regulators were on board, Schwimmer said that “you should assume we do not like to surprise our regulators."

“Cloud Computing to Create New Paradigms:” BMV CIO

As the world’s stock markets operate in a machine-to-machine model, cloud computing is set to have a huge impact, said Claudio Vivian, CIO, Mexican Stock Exchange (BMV), in March 2022, during an interview with IT Masters.

“There are certain technologies that are breaking through, such as blockchain, artificial intelligence and hyper-automation, without neglecting the impact of the cloud. We know that in the medium to long term it will create different ecosystems and the current operation will be obsolete. A new paradigm is being created and the cloud will allow us — with the use of microservices and edge computing, for example — to reach new levels of response, resilience and security,” said Vivian.

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