A new wave of consolidation is
washing its way through the futures vendor
community. Hamish Purdey believes
it’s not the wave that matters, but the ripples it
leaves behind. The smart money is on the newly emerging
vendor landscape of 2014 heralding some long overdue
technological change in the industry.
The recent news that Bloomberg has acquired RTS for an
undisclosed sum has prompted the question from many as to
whether there is yet another wave of consolidation underway in
the futures vendor community.
The move by Bloomberg to buy RTS
represents an aggressive move by them into the platform space.
RTS, established by the Germunden family, has a long pedigree
of not only providing direct market access to futures markets
but also to equities markets worldwide.
RTS has built a strong business
both in the on premise and in the hosted environment. In turn,
Bloomberg also acquires the benefit of years of experience
fine-tuned by RTS not only in the connectivity and market data
game but also in risk management.
No doubt this will have come
into Bloomberg’s thinking when pondering the buy
vs build debate.
A history of
Consolidation is nothing new. The industry has seen a
significant amount of it over the last ten years: a glance at
an FOW exhibitor list from ten years ago shows a very different
vendor landscape to the one we have today.
In spite of this, very few
vendors have stepped up and attacked the full STP question.
Sungard and ION Trading are still the only vendors with a full
front to back offering while Fidessa & Bloomberg round out
the big four vendors now. The recent acquisition of UL-Link
again shows private equity’s attraction to the
stickiness and recurring revenue nature of the fin-tech
Acquisition and then acquisition
again has consumed a large number of vendors. Companies such as
Yes Trader, Ecco, Future Dynamics, Exchange Technology,
Exchange Systems Technology, Ubix, EasyScreen, Emos, GL, WTD
Consulting, Spread Intelligence, Patsystems, Mixit, Tamesis,
FFastFill, Tickit and now RTS have been subsumed into the
bigger players or into industry.
Fidessa remains the only listed
vehicle of the remaining set, which makes market sizing a
difficult task. We also continue to see some exchanges compete
in this space with largely single exchange solutions which
provide exchange specific functionality.
And of course the question still
remains: 'just when will the citadels of the in-house provided
solutions fall or become integrated into platform based
The impact of
Acquisitions happen. It’s the effect that
they have which is important. It will be fascinating to see
what the ripples of this particular wave of consolidation will
The next steps for the more
established, independent vendors such as Trading Technologies,
CQG, Orc, Object Trading, Stellar Trading, ATEO, Crystal Stream
and others will be keenly watched.
Some of these companies have
hundreds of staff around the world and boast fully hosted
deployments while others are definitely sub-scale and below
Take Australian based and ASX
listed Iress, for example. What path will it follow as it
integrates the acquisition of Wealth Management platform Avelo
in the UK for £210m in 2013 and begin to expand from its
largely Australian base?
Do the strategies of these
vendors take them towards an acquisition strategy, or cross
asset, or to a platform / SaaS basis?
I believe we will continue to see specific domain expert focussed vendors emerge with nimble, non-legacy, 21st century technology.
Do they seek to improve their
straight through processing capabilities or do they stay true
to their existing domain expertise in a single silo of the STP
Do they seek to jump on the wave
of M&A or continue to ride the storm and continue to
control their own destinies?
In reality, each will follow
their own path – not the crowd. But the new breed of
vendors those decisions create will change the industry and its
way of working.
Emergence of new
I believe we will continue to see specific domain
expert focussed vendors emerge with nimble, non-legacy,
21st century technology.
The recent announcement by Duco
of a win at FC Stone as well as Gresham Computing (at which I
am a non-executive director) winning Macquarie both with cloud
based reconciliation technology deployments are examples of
futures instruments and trade flows being managed by
The technology opportunity of
2014 and beyond certainly outweighs anything available when any
of the traditional vendors were born and this is evidenced by
the significant platform re-work projects underway at a number
of the vendors in both front and back office technology.
In a futures world of compressed
sell side revenues both from commission and interest, an OTC
environment with an unknown future and increasingly unknown pay
day and continued regulatory uncertainty, I think the only
certainty is that the vendor space will continue to change and
Hamish Purdey was most recently Chief Executive
Officer of FFastFill plc and now serves on the board of Gresham
Computing plc as a non-executive director. He can be contacted