London Stock Exchange goes after Bloomberg’s data crown with Microsoft deal

LSEG is Europe’s largest exchange operator, based on the market value of its own shares. While it operates legendary exchanges in London and Milan, much of its focus today is on financial data.

The company owns a mountain of data, thanks in part to all the transactions its platforms process and the purchase of Refinitiv, the $15 billion financial information and terminal business. That purchase, from a consortium of Blackstone and Thomson Reuters, was announced in 2019 and completed last year.

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Refinitiv is one of Bloomberg’s biggest competitors in selling financial data to investors, corporations and other clients. Bloomberg and Refinitiv compete with Dow Jones, the parent company of The Wall Street Journal and Financial news.

Microsoft, meanwhile, has the Azure cloud computing platform, Teams conferencing software, and other technology.

The merging of LSEG data and Microsoft technology poses the biggest threat yet to Bloomberg’s financial data business, said Robert Iati, general manager of research firm Burton-Taylor International Consulting. Bloomberg’s competitors include LSEG’s Refinitiv unit and FactSet.

Bloomberg did not respond to requests for comment.

Companies have tried for years to take over Bloomberg’s terminal business but failed to make much headway, largely because users struggled to communicate while using real-time data, Iati said.

Everyone wants Bloomberg, he said. One of the main reasons the Bloomberg terminal is so tacky is communications, he said, pointing to the terminal’s instant-messaging feature.

Integrating Teams into the Refinitiv platform could change that, he said. I think it is a very good move for the LSE, Iati added.

LSEG leaders and others said moving to the cloud will save Refinitiv on data storage costs and make data more readily available outside the office.

With cloud you just call Microsoft, they already have the capacity, instead of buying more servers, said Michael Werner, aUBSanalyst. It just makes it easier to be more flexible in how much data and processing power you need.

If this partnership is successful, we will see increased market share and pricing power, Werner said. Still, he added, investors remain skeptical and the benefits could take years to manifest.

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LSEG chief financial officer Anna Manz said Microsoft’s technology, including machine learning and cloud computing, will make financial models using LSEG data more accurate.

Incorporating Teams will speed up financial transactions and improve communication between advisors and their clients, she said. We can turn it into a much more valuable tool than a portal that holds data and analytics, Manz said.

In any case, LSEG is the third major exchange since the fall of 2021 to close a cloud computing deal with a major technology company, joining CME and Nasdaq.

The deal comes at a critical time for the London Stock Exchange and the city’s financial centre. IPOs have plummeted since the pandemic, and London faces increased competition from Amsterdam, Paris and other cities as Europe’s largest financial center following Britain’s exit from the European Union.

The LSE is trying to get Softbank’s Arm, Britain’s largest technology company, listed on the London Stock Exchange instead of the Nasdaq Stock Market.

For years, LSEG has pushed to expand its business, reducing its reliance on traditional sources of income for an exchange, such as trading and listing fees, and moving into areas such as index building. Investors value predictable revenue streams, such as recurring data subscription sales, over volatile ones.

The purchase of Refinitiv represented a step change. Three years ago, LSEG raised most of its money from traditional sources. Today, nearly three-quarters of revenue comes from subscriptions, primarily the fees customers pay for data.

It’s no longer really an exchange company, it’s now a data company, UBS’s Werner said.

As of December 22, LSEG’s share is up 3.7% this year, slightly ahead of the benchmark FTSE 100 index, which is up 1.2%.

Write to Josh Mitchell at [email protected]

This article was published by The Wall Street Journala fellow Dow Jones title