Ten year cloud data deal between LSE and American software giant, sees Microsoft acquire 4 percent of equity stake in UK bourse
Microsoft and the London Stock Exchange Group (LSEG) have signed a ten year strategic agreement, to migrate the exchange operator’s data platform to the cloud.
The UK bourse operator and the American software giant announced the deal, which Microsoft said aims to generate $5 billion in revenue from LSEG and the financial services sector.
As part of the deal, Microsoft is to purchase a 4 percent equity stake in London Stock Exchange Group, from the Blackstone/Thomson Reuters Consortium.
The deal with the London Stock Exchange will see Redmond architect the UK bourse’s “data infrastructure and build intuitive next-generation productivity, data and analytics and modelling solutions with Microsoft Azure, AI, and Microsoft Teams”.
The LSEG’s data platform and other key technology infrastructure will migrate to Microsoft Azure, enhancing its existing cloud migration strategy.
This will include Refinitiv platforms that power over 40,000 financial institutions in 190 countries.
The London Stock Exchange purchased financial information firm Refinitiv back in 2019 in a deal valued at $27 billion.
And Scott Guthrie, Microsoft’s executive vice president, Cloud and AI Group, will be appointed as a non-executive director of the LSEG.
“This strategic partnership is a significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business, and will transform the experience for our customers,” said David Schwimmer, CEO of LSEG.
“Bringing together our leading data sets, analytics, and global customer base with Microsoft’s comprehensive and trusted cloud services and global reach creates attractive revenue growth opportunities for both companies,” said Schwimmer.
“We are delighted to welcome Microsoft as a shareholder,” said Schwimmer. “We believe our partnership with Microsoft will transform the way our customers discover, analyse, and trade securities around the world, and create substantial value over time. We look forward to delivering on that potential.”
The deal was also welcomed by Microsoft’s CEO Satya Nadella,
“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,” said Nadella.
“Our partnership will bring together the industry leadership of the London Stock Exchange Group with the trust and breadth of the Microsoft Cloud – spanning Azure, AI, and Teams – to build next-generation services that will empower our customers to generate business insights, automate complex and time-consuming processes, and ultimately, do more with less,” said Nadella.
LSEG has a contractual agreement over the 10-year period to spend a minimum of $2.8 billion on cloud-related products with Microsoft.
Judson Althoff, executive VP and chief commercial officer, expanded on the deal in a blog post on Sunday.
Althoff noted that organisations across the capital markets value chain are facing an “increasingly complex operating environment with macroeconomic headwinds, stricter regulatory controls and traditional revenue sources becoming more challenging.”
He wrote that these conditions are putting greater pressure on firms to reinvent business models and do more with less. However, their legacy platforms, siloed information, limits on scale and data overload hinder their ability to deliver the best client experience, insights and tools. This requires a digital transformation approach underpinned by modern cloud and AI technology.
Althoff noted that LSEG has already started to address these issues for their customers, and through this strategic partnership, we will accelerate that transformation.
Althoff said that Microsoft will help with the democratising financial markets data, as this deal “will co-create an open, centralized, financial data platform enabling seamless data democratization, collaboration and new monetization opportunities across the financial services ecosystem.”
He also noted that the deal will deliver next-generation workspace experiences via “the next generation of LSEG Workspace on Microsoft Teams platform that will support in-application rich experiences for understanding trends and analysing risk and building scenarios while meeting strict security, privacy and compliance requirements.”
Microsoft said that LSEG and it “will work together to co-create next generation analytics and modeling solutions which are cloud-based and will enable powerful model construction, validation, diagnostics and deployment using Microsoft Azure AI, Synapse, Power BI, Excel and Teams with LSEG’s advanced analytics and modeling capabilities.”
Microsoft’s purchase is expected to complete in the first quarter of 2023, subject to regulatory approval.
Regulators have previously expressed concern about the over-reliance of financial firms on too few cloud providers, given the disruption this could cause across the sector if a provider went down.