Refinitiv - What other choice does the London Stock Exchange really have?
There has been a lot of commentary on the proposed acquisition of Refinitiv by the London Stock Exchange Group (LSEG) but much of it seems to have missed the real point - what other choice does the LSEG really have?
Its stated aim is to create and invest in businesses that can scale globally but the traditional stock exchange model is nothing like it used to be. The market for equity research, which investors rely on to make informed decisions, has been decimated by MiFID II. Exchange listings have also steadily declined as private equity and crowd sourcing wrestle with traditional exchanges to provide access to capital.
Secondary trading has also fragmented across a host of smaller venues and so rendered the construct of a “National” stock exchange almost meaningless. And, finally, the ability to create scale by buying other exchanges is constantly thwarted by the nationalistic hubris of regulators.
The net effect is that nearly all traditional exchange activities have come under severe pressure. Providing data is the major exception, however, as our ability to consume data appears almost limitless. Not only to drive investment decisions, but power entire customer journeys too (just as we experience in our daily retail lives). Refinitiv has the potential to add significant scale and diversity to the LSE's dataset - both of which are pre-requisites for effective AI and machine learning.
The other key advantage Refinitiv provides is that it gets The LSEG one step closer to its customers. Now isn't the time to debate whether Eikon is a better or worse terminal than Bloomberg but, either way, there are plenty of them deployed around the world. Trading margins continue to compress while the regulatory overhead is going up too. So, making the path between investors and liquidity shorter is another obvious way of creating competitive advantage.
Harvesting and monetising data is fast becoming the primary business goal of large technology firms. That is exactly what the LSEG, and its competitors, have become.
Data Management Executive | Business Transformation | Data Operations | Quality & Transformations | Cognitive Automation | Impact Investor | 2x Entrepreneur | (Views are Personal)
4ySteve Grob Great article! I feel there is more to it. LSE has few strong areas. We all know about the exchange business but the other area is as numbering agency for SEDOLs. They have great data and the operating margin in good too from that business. The think getting into the data business for them is a very logical move. On one side, there is Intercontinental Exchange, who are already breathing on their neck and 30-30% margin is not bad. It can give them lot of opportunities to get additional datasets and growth for both numbering agency and exchanges business.
Market Data Services Management
4yGood article. I think the deal was less about terminals and more about Refinitiv’s global datafeed and distribution footprint. It came at a hefty price tag compared to similar transactions though.
J🌍ining the d🌎ts
4yMore pertinent question: what next and after that?
CEO Euronext Market Services, Managing Director Commcise Software
4yIndeed. CBOE, Euronext and others are all making moves to get closer to the buyside. This is a smart target, however, not convinced it's the right price. Refinitiv has its troubles.
When I worked at the LSE nearly 35 years ago, one of our concerns was that then market leader Reuters (as it was) would use its massive terminal base to siphon off order flow and choke the exchange's market. At the time, the LSE wasn't so bothered about data - the TOPIC system was actually met with resistance from the exchange's ruling Council, though it managed to get out of the door and made decent revenue at the time. But Reuters then was a much larger data provider and the exchange was very wary of its might. What a difference a few decades makes. Great article Steve.