The latest deal in the apparently growing trend of Big Tech partnering financial marketplaces
Microsoft is to buy a £1.5 billion stake in London Stock Exchange Group (LSEG). This is part of a 10-year strategic partnership between the software giant, which is expanding in all directions, and the UK exchange whose roots stretch back to 1698.
Under the agreement, Microsoft will buy a 4% stake in LSEG, worth about £1.5 billion, from Blackstone, Thomson Reuters, Canada Pension Plan Investment Board and Singapore’s sovereign wealth fund GIC.
Microsoft will also provide LSEG with data analytics and cloud infrastructure products using its Azure, AI and Teams platforms. The partners intend to develop a “digital market infrastructure” based on cloud technology and use Teams to connect users.
Microsoft’s will employ its machine learning to help investment groups “avoid the labour-intensive and expensive process of creating models from the ground up”.
LSEG’s obligations
Under the terms of the deal, LSEG must spend £2.3 billion at Microsoft over the 10-year partnership, “reflecting minimum cloud consumption expectations,” the LSEG said. The group is in the middle of integrating its data and trading group Refinitiv, which it bought for $27 billion in 2019.
Scott Guthrie, EVP of Microsoft’s Cloud and AI unit, will take a seat on LSEG’s board.
Less unlikely bedfellows
Not so long ago, cloud hyperscalers did not look like a good fit for finance platforms which rely heavily on low latency, high throughput connectivity, but in the last year, this has changed as technology has evolved.
In November, Google pumped $1 billion in Chicago-based CME Group, a derivatives marketplace, as part of a 10-year cloud computing deal.
Almost exactly a year earlier, Nasdaq and Amazon Web Services agreed a similar partnership.
Satya Nadella, CEO of Microsoft, said: “Advances in the cloud and AI will fundamentally transform how financial institutions research, interact and transact across asset classes, and adapt to changing market conditions.”