Transatlantic market operator Nyse Euronext says it stands to realise over $250 million in annual run-rate technology savings by the end of 2010 by buying out Atos Origin's stake in the Atos Euronext Market Solutions (AEMS) joint venture and bringing its IT operations back in house.
Nyse Euronext said in December that it had "agreed in principle" to acquire the 50% stake in AEMS held by Atos Origin and repurchase ownership of the NSC cash trading and Liffe Connect derivatives trading platforms, as well as AEMS's third-party exchange technology business for EUR275 million.
The 50/50 venture was formed between Euronext and Atos Origin in 2000 to manage internal software development and licensing of the exchange's NSC and Clearing 21 platforms to third parties. The JV was later merged with the Euronext.Liffe Market Solutions business.
In a statement Nyse Euronext says as a result of the AEMS transaction, it expects to generate over $200 million in annual run-rate technology cost savings by the first quarter of 2010. By year-end 2010 the exchange expect to realise the full $250 million of merger-related annual run-rate technology savings.
Joost van der Does de Willebois, acting CFO at Nyse Euronext, says the decision to in-source its European trading and IT operations through the AEMS transaction, "will give us control over all of our core technology platforms".
Van der Does de Willebois adds that the move will also "greatly enhance our global exchange technology business".
The move to grow its exchange technology business could pitch the New York market operator in direct competition with European market operator and trading technology vendor OMX, which is being acquired by rival US exchange Nasdaq.
As well as building its technology business through the AEMS transaction, Nyse Euronext has also moved to boost e-trading services in the last couple of years by buying vendors such as Matchpoint Trading and Transact Tools. More recently the exchange has acquired market data technology outfit Wombat Financial Software.
News of the cost reductions following the AEMS buyout comes as Nyse Euronext reports a tripling in fourth quarter net income due in part to higher trading volumes on both sides of the Atlantic.
Fourth quarter net income increased to $156 million from $45 million a year earlier. Total revenue for the quarter rose to $1.18 billion from $659 million.
For the year ending 31 December 2007 the exchange posted net income of $643 million, a 214% increase over net income of $205 million reported for 2006.
"We reached new levels in trading volume, message traffic and global IPO proceeds, underscoring the value of our strong technology, compelling business model and unparalleled global presence," says Duncan Niederauer, CEO, Nyse Euronext.
Despite the gloss put on the results, shares in the exchange operator slipped by nine per cent as analysts expressed disappointment over rising costs.