Largest derivatives exchanges support the fintech buyout of ex-Deutsche Börse chief

Two of the world’s largest derivatives exchanges have a private equity buyout of US fintech group Trading Technologies backed by Carsten Kengeter, the former chief of Deutsche Börse, in a deal that will determine the future of a critical software provider for the global futures market .

Singapore Exchange (SGX) and CBOE Global Markets are among the limited partners that will invest in 7Ridge, a London private equity fund owned and managed by Kengeter, which will purchase Trading Technologies.

The deal, announced late Sunday, will value TT at just under $500 million, according to a person involved in the talks.

SGX will invest approximately $200 million in 7Ridge as cash and debt. CBOE said the investment was immaterial, but confirmed it would also be a mix of cash and debt.

Chicago-based TT is widely used by banks, proprietary traders, hedge funds and brokers to connect to the world’s major futures exchanges, including SGX and CBOE. But clients have been keeping a close eye on the fate after owner FSB Companies, the investment company of former Chicago pit trader Frank Brumfield, hired investment bankers last year to assess its strategic options.

A year ago, TT was in talks to be acquired by Goldman Sachs, which went bankrupt after clients and exchanges failed to ensure that a key part of their trading systems was owned by one of their main rivals, according to two involved.

In a related move, 7Ridge will appoint Keith Todd, an industry veteran and chief executive of Aim-listed risk management software group KRM22, as TT’s new chief executive. 7Ridge is also expected to take a 25 percent stake in KRM22.

“A lot of people wanted to see TT independent and not consumed by a broker or an exchange. We’ve had an alignment of the stars which is very helpful,” Todd told the Financial Times. He added that the capital injection meant that the company “can grow organically and acquisitions are available to us”.

Tim Geannopulos, outgoing head of TT, said there was interest from other parties, but the company was focused on completing an extensive internal IT project.

Many of TT’s main rivals have been consolidated or sold in the past year as customers attempt to cut IT costs by using few suppliers. Broadridge Financial Solutions bought Itiviti this year for $2.5 billion and Ion, the UK-based group, has acquired Dash Financial Fidessa and Broadway. Deutsche Börse took a majority stake in Quantitative Brokers.

Kengeter, also a former banker of UBS and Goldman, is the principal and majority shareholder of 7Ridge. He set it up in 2018 after he left Deutsche Börse during a criminal investigation into his alleged insider trading. He paid 4.75 million euros to settle the case. The directors are Veronica Augustsson, former chief executive of Swedish trading software group Cinnober, and Catherine Furrer-Lech, former chief of staff at UBS under Kengeter.

Broadhaven Capital Partners and Sullivan & Cromwell advised TT on the deal, which is expected to close by the end of the year following regulatory approval.