January 13, 2014

IntercontinentalExchange Group CEO Jeff Sprecher has hired Evercore Partners Inc. to sell off parts of the NYSE technology businesses acquired in the takeover of NYSE Euronext. Deals are expected to be presented to potential buyers in the latter half of January.

According to Bloomberg Businessweek's sources, ICE may approach potential buyers including Fidessa Group Plc, Investment Technology Group, KCG Holdings, Interactive Data Corp. and Bloomberg News. Businesses for sale may include Nyfix, SuperFeed, Wombat and Metabit.

[For more on the takeover see Uncertain Future For NYSE Technologies]

David B. Weiss, senior analyst with Aite Group says these divestments should not be a surprise. Sprecher is a very focused, pure play kind of leader. With his eye on interest rate futures and US stock exchange he will rapidly integrate relevant technologies to leverage those projects. The rest is simply baggage.

Data Centers

In this light, it's curious ICE is holding onto NYSE's data centers. Perhaps ICE plans to shake up the data center workload, but why would Sprecher even bother? Surely ICE wants people to connect to them, not be the host of data. It seems an unnecessary ordeal with the accompanying challenges of real estate and generators when third party data centers are available globally for rent. Even Nasdaq's acclaimed FinQloud is hosted by Verizon.

"Maybe they want the real estate," guesses Weiss before adding, "I don't expect data centers will be long for life under them."

A Better Question: What will ICE Keep?

For a firm with razor focus and great success in the markets, perhaps the question should not be on why they are getting rid of these businesses, but rather on why they are keeping others.

A notable example of ICE impressive technology integration include the acquisition of the communication network YellowJacket. Today it is known as the popular ICE Chat for instant messages in the derivatives market.

Another interesting question is who will buy ICE's baggage? It was reported ICE gave little valuation to NYSE technology in the acquisition, explains Weiss. "If one of the smartest guys in the market says he doesn't think it's worth much, who is going to buy it?" Yes, there is a lot of great technology under NYSE, but some of it has had its time.

Closing the Door

Today, like other industries, exchanges have learned to compartmentalize and license out processes and product. But as one of the forefathers of the industry responsible for trailblazing much of today's tools, it shouldn't be a surprise NYSE has accumulated the biggest inventory of technology and services over the years. The ICE acquisition is a chance to clean out the closets.

Indeed, ICE is a much younger company, focused from the start, and never had to worry about the things NYSE historically has. "It shouldn't be surprising to anybody that there's going to be some rejiggering of these two companies," says Weiss. "One is new and focused, the other is the granddaddy of exchange groups. When you put focus on the grandaddy, there's going to be some things that are discarded, sold off, and wound down. Most things they keep are going to be fundamental to what they do."

"The sprawling offerings model is history… The notion of big technology complexes being part of an exchange group's personality is over."

ABOUT THE AUTHOR
Before joining UBM Becca served as Editor-In-Chief at Kapitall Wire, the sister site to an online brokerage firm that combines the challenges of the stock market with the thrill of ...