Microsoft and the London Stock Exchange have signed a historic partnership!
The London Stock Exchange Group is the latest exchange operator to partner with one of the cloud computing giants. In addition to the cloud, the stock market operator’s “Workspace” platform will be integrated into Microsoft’s software suite. The American giant holds a 4% stake in LSEG.
A partnership established for at least 10 years
The London Stock Exchange invites itself to the Microsoft software suite. The American tech giant and the London Stock Exchange Group (LSEG) announced on Monday that they signed, after more than a year of talks, a major partnership from dematerialized computing (the cloud) to the development of software tools.
The partnership between the two giants in their respective fields is designed to last. Microsoft will take a 4% stake in the stock market operator on Monday, as part of an investment of around 1.5 billion pounds (1.75 billion euros). The Microsoft vice president for cloud and artificial intelligence has joined the LSEG board.
In return, LSEG agreed to buy at least £2.3 billion (€2.67 billion) of cloud computing services from Microsoft over ten years. Behind this capital-intensive operation comes a collaboration between the two groups to “develop data infrastructure systems” and “modeling and analysis” systems, according to the terms of the joint press release.
Clearly, this is about moving the LSEG data platform to the Microsoft cloud, especially the Refinitiv platform (quotes, time series, ESG research, etc.) that serves more than 40,000 financial institutions worldwide.
IT and AI are changing the stock market
This is not the first time that Microsoft has bought out its customers, many infrastructure or service providers have done so before. But, financially, Microsoft enters the heart of the economic reactor.
With digitalization, the scale of importance of this sector has changed. Computers calculate, place orders in milliseconds, manage complex portfolios, develop strategies.
“Advances in cloud computing and artificial intelligence will fundamentally change the way financial institutions research, interact and transact,” said Satya Nadella, CEO of Microsoft.
The first concrete use of artificial intelligence is finance. BlackRock, the global leader in asset management, would be different without its genius algorithm aptly named Aladdin.
For its part, the London Stock Exchange has changed so much that pure stock market activity has become a minority.
In 2021, the City’s leading institution acquired Refinitiv for $27 billion. The former financial information business of Thomson Reuters Group, a competitor to Bloomberg’s leader, is three times larger than LSEG, employs 18,500 people and has terminals in every bank in the world. A more lucrative job than managing the London market.
The giants are fighting for data
In 2021, Amazon signed on to Nasdaq, the US technology exchange, and Alphabet, Google’s parent company, signed on to the Chicago Mercantile Exchange. We see the stars of the web salivating in front of this ocean of data, whose monetization is visible and immediate. They are in the process of moving to remote management through the cloud.
The partnership with Microsoft reaffirms the strategic shift made by LSEG following its acquisition of financial data giant Refinitiv in January 2021. The acquisition, partially funded by the sale of the Italian stock exchange to Euronext, makes LSEG the second largest global financial data company behind Bloomberg.
As a result, data now represents almost 70% of LSEG’s turnover, a welcome turning point for the market, data is seen as a more profitable but above all more elastic activity (subscription system).
With the boom in Responsible Investing (SRI), the data industry is set to grow further, requiring more data and analytics. This is why LSEG is more valued than Euronext or its main competitors historically.
The change in strategy also allows the LSEG group to offset the decline of the City of London, which has become less attractive for listed companies, a trend accelerated by Brexit. Ten years later, London and Paris accounted for the largest amount of listed companies, whereas ten years ago the City weighed twice as much as Paris.