16 September 2009 News

 

LSE buys MillenniumIT to replace TradElect

London Stock Exchange Group has agreed to acquire MillenniumIT, a Sri Lankan-based technology services company serving the capital markets industry, for £18 million. The Millennium IT trading system will replace TradElect, its current system by 2010. TradElect was upgraded at a cost of £40 million two years ago. The ownership of its intellectual property by Accenture and its high support costs, balanced against competition from new venues and high trading volumes had put a great strain on its ongoing service.

MillenniumIT's high performance technology will provide the Group with a highly scalable and very low latency in-house developed trading system with multi-asset class functionality and quicker product speed to market.  In addition, the transaction will give MillenniumIT the backing of the Group to enable it to develop further its global exchange technology business. 

MillenniumIT will continue serving its existing clients, with its chief executive, Tony Weeresinghe, reporting directly to chief executive of the LSE, Xavier Rolet.   

Rolet said: "Improving our technology and increasing our competitive position in the fast-moving trading environment is vital.  This transaction enables the Group to implement a new, more agile, innovative and efficient IT capability for our future business development as well as running a new cash trading platform which will provide substantially lower latency, significantly higher capacity and improved scalability.  

"It will also offer cost saving opportunities in the future and give the Group a footprint in Asia.  Moreover, MillenniumIT is a proven business, already serving multiple clients in multiple geographies, including some of the best known in their fields.  The potential from this transaction is considerable for both parties."

David Lester, director of IT for the London Stock Exchange Group, said: "MillenniumIT are a leader in developing low cost high performance trading platforms and financial markets software.  Going forward, as well as serving existing and new clients, they will be the Group's in-house software development team, gradually replacing our current suppliers and bringing intellectual property and know-how fully within the company.  We look forward to introducing their proven trading platform before the end of 2010, which will provide our clients with sub-millisecond trading latencies and give the Group a very fast, multi-product, cost-efficient, scalable trading platform.  The transition will be carefully managed, with further enhancements to TradElect planned in the interim."

The Group will begin migrating clients to MillenniumIT's trading system from the end of 2010, replacing TradElect, Infolect, and other interfaces.  The new platform will allow the Group to add functionality, in particular for Italian clients, with the possibility of accommodating both trading after hours and stop loss orders.

IT development and operational costs for the Group will be reduced, resulting in estimated annual cost savings of at least £10 million from FY2011-12.

Depreciation of investment in the current TradElect trading platform will be accelerated as a result of the transaction, and further planned upgrades that take place in the interim will be taken as operating expenses in the period they occur.  In total, these are expected to represent non-recurring incremental costs of £25 million in FY2010 and £6 million in FY2011. 

Under the terms of the Offer, the Group has offered to acquire 100 per cent of MillenniumIT's shares for cash consideration with a share alternative.  It is estimated that 73 per cent of the total deal consideration will be paid in cash, with the rest in new LSEG shares to be issued, estimated at around 600,000 shares.

The Group has already received irrevocable undertakings representing over 90 per cent of the shares in MillenniumIT.  The transaction is expected to complete by mid October 2009