Nasdaq OMX is to combine its Market Technology and Corporate Solutions businesses in an effort to reduce its reliance on stagnating stock market volumes and build "one of the top technology organisations in the world".
OK, this may be just my perception, but wouldn't this present a conflict of interest and perhaps be self serving from NASDAQ's perspective. I recall the Enron/Worldcom, et al, where accounting firms could no longer provide consulting services under the
same moniker, which resulted in (now) Big 4 consulting firms which were supposedly independent from the auditing arm, even though the corporate culture was identical.
I am not familiar with the regulatory approvals involved with this type of expansion, but it seems to me that this type of arrangement puts the fox in charge of the henhouse. OK, so this clearly falls outside the Hart-Scott-Rodino Act, but really, NASDAQ
is a stock exchange and also wants to branch out into tech solutions? Gimme a break! As far as I'm concerned, this doesn't pass the smell test.
The conflict of interest can't be denied but Deutsche Boerse IT has been doing this for years. According to its
website, it "runs 30 marketplaces and exchanges ... for other ... exchanges around
Smart move and not dissimilar to what we have seen other exchange combinations doing in the past. When Bob acquired OMX he made no secret from the fact that one of the main reasons for the acquisition was the OMX technology (and their technology footprint
in the industry). First he consolidated the technology within the group and now he seems ready to truly expand into external sales (which have continued all along, but in subsidiary order to the own technology consolidation). NASDAQ OMX seems ready now to
leverage their investments in technology and expand from their footprint in trading technology and (to a lesser extent) clearing and settlement technology into the more lucrative added value services technology. I would suggest they would greatly benefit of
using other technology providers' enabling technology and concentrate on the development of business funtion to fully reap the benefits of this huge potential.
When Duncan took the helm of NYSE Euronext he was the first to tell the financial analysts (was it back in 2009?) they should no longer rate NYSE Euronext as a financial institution but as a technology company and he set rather ambitious objectives to the
newly established NYSE Technologies which he reintegrated within the NYSE Euronext group, ambitions which have not been met since, although NYSE remains a very strong player in the market.
Deutsche Börse, which already had a longstanding tradition of selling technology (mainly trading technology) to other exchanges, using both the external license model (e.g. sellling a license of the last generation EUREX trading system to the Shanghai Stock
Exchange) and the hosting operations model (such as for Wiener Börse and the Irish Stock Exchange). Obviously they learned from the due diligence with NYSE Euronext and have collapsed two entities into one, more sales focused organization which should enable
them to take advantage of their newly developed trading systems and other technology assets. They have adopted a smarter methodology in using enabling technology instead of trying to develop it all and have been focusing instead on the more lucrative business
function development (which they know best)
The key to success for these intitiatives to truly deliver on the revenue and profit expectations will be to create a proper sales and support structure and to consistently use best-of-breed enabling technology to being able to focus on what they know best:
Good luck to all! Piet
© Finextra Research 2014