Morgan Stanley is a backer of the bank-led chat project, Symphony, crafted to woo trader talk back to a channel the banks can control.
And here’s a Morgan Stanley built theory of the terminal business:
We view the evolution of the industry in three stages:
Phase 1 (now to 2018): High-Cost, Bundled Products Prevalent: Historically, the network effect has been a gating factor that led participants in the market data terminals industry to keep their existing high-cost terminals. Legacy terminals have comprehensive functionality, so customers only need to purchase one main product. Counterparties purchase the same product, so that business can transact through the terminals (i.e. through chat). Learning of specific shortcuts enhances stickiness. Changes to workflow is typically disruptive, which leads to high retention rates. Examples include Bloomberg and TRI’s Eikon product.
Some current products in the market contain full-functionality, but do not have the network effect (FDS, CapIQ). Customers requiring less frequent interaction with outside parties (i.e. trading) may choose to use these products. The cost of the products is often lower than the premium legacy products with network effects, but remains high given switching costs and bundling of the underlying products.
Phase 2 (2017 – 2019): Facilitating Escape:
This post has been substantially revised in the wake of an internal discussion here at the FT…
Close readers will recall that just earlier this week we were pondering the case of one Richard Usher, formerly chief FX dealer for JP Morgan in London. His mangled remains were found under the proverbial publicity bus that is the official regulatory investigation into the supposed fixing of the daily WM/Reuters forex price fix, which is currently underway on both sides of the Atlantic. It seemed a shame to us that someone had been executed, professionally, for simply being in possession of an alleged Skype chat, therein containing some colourful banter. Especially when no evidence of said Skype chat had yet been presented.
It looked to us like someone, almost certainly in regulatory circles, was trading Usher’s name for political gain.
But now we’re confused. Read more
A big tip of the hat to James Politi, the FT’s man in Washington, for tracking down the letter below…
Chuck Grassley, the high-ranking Senate Republican from Iowa, has a hunch that those exclusive two seconds of early Thomson Reuters/University of Michigan consumer sentiment data might not have been, well, in the public interest, given the involvement of a public university. Read more
That Lance Uggla, he’s such a tease. Witness the founder of the CDS price aggregator Markit Group in Tuesday’s FT:
“I would describe our vision as a financial iTunes of sorts,” he says, in reference to the store where Apple sells its own applications and those from independent developers. Mr Uggla predicts that an efficient one-stop shop for accessing equity prices, media content, ratings and research – from exchanges, news organisations, journals, credit rating agencies and analysts – would be welcomed “with open arms” by market participants.
Tom Glocer will step down as chief executive of Thomson Reuters sooner than expected, handing over power on January 1 to Jim Smith, chief operating officer, in another round of management upheaval at the financial and professional information business, the FT reports. The choice of Mr Smith, a Thomson veteran who ran its legal and other professional units before being promoted this July, was seen by some insiders as evidence that Woodbridge, the Thomson family holding company that owns more than 55 per cent of the stock, is tightening its hold on its largest asset. People close to the company say that David Thomson, chairman, and Geoffrey Beattie, the family consigliere who runs Woodbridge, have been frustrated with the Thomson Reuters share price, which has fallen from more than $41 to $27.22 this year. The company indicated that the latest restructuring would incur “one-time charges”, but gave no details, saying that its guidance for 2011 was otherwise unchanged. Investor fears about the impact of market turmoil on headcount at the group’s financial services clients have contributed to pressure on the stock.
Tom Glocer will step down as chief executive of Thomson Reuters sooner than expected, reports the FT, handing over power on January 1 to Jim Smith, chief operating officer, in another round of management upheaval at the financial and professional information business. The choice of Mr Smith, a Thomson veteran who ran its legal and other professional units before being promoted this July, was seen by some insiders as evidence that Woodbridge, the Thomson family holding company that owns more than 55 per cent of the stock, is tightening its hold on its largest asset. The decision to replace Mr Glocer with Mr Smith was a mutual one, driven by a realisation that management had to concentrate on operations in a tougher economic climate rather than pursue more aggressive strategic goals, the newspaper says, citing someone close to the events.
Spain has asked data providers to switch bonds used for pricing its benchmark debt, in an unexpected move that has pushed quoted yields sharply below last week’s euro-era highs, the FT reports. Just a day after borrowing costs soared in a lacklustre auction, the yield on 10-year Spanish debt, which moves inversely to prices, dropped by about 35 basis points on Friday, mystifying traders. However, it has emerged that Thomson Reuters and Bloomberg, the main providers of government bond price data, were asked by the Spanish Treasury to change the main quoted benchmark price, from the new 10-year bond launched on Thursday back to an older one. After the difficult sale of new debt, in which Spain paid the highest yield since 1997 in an issue of 10 year bonds, the Treasury sent a request marked “urgent” on Friday morning, asking the data providers to restore the older bond as the benchmark. This decision reversed a request made before the auction. The yield on the old bond was trading on average about 35 basis points lower. “The Spanish have clearly seen yields are higher on the new benchmark and decided to go back to the older one. It is a farce and shouldn’t be allowed,” said one trader.
Bloomberg is planning the largest deal in the private company’s 30-year history, with a $990m agreed bid for BNA, an employee-owned legal, tax and regulatory information company founded in 1929 as the Bureau of National Affairs, the FT reports. The financial data group is paying a steep three times BNA’s $331m revenue for 2010, after a sale process that drew interest from other potential bidders, including Thomson Reuters and Reed Elsevier. The acquisition would add significant heft to Bloomberg’s efforts to crack the legal and regulatory information markets with Bloomberg Law, where it needs more content to compete with Thomson Reuters’ Westlaw and Reed Elsevier’s Lexis Nexis. BNA, which has a seat in the White House press briefing room, would also boost Bloomberg Government, a data-heavy service for Washington lobbyists and lawmakers. The acquisition of the largest independent publisher in the industry depends on regulatory clearance from the Department of Justice and the Federal Trade Commission.
The family behind Thomson Reuters is pushing for faster results from the three-year-old merger of Thomson Corporation and Reuters, the FT says. The company initially exceeded promises of integration benefits, but has struggled to introduce a central new product in its markets division. People close to the board say the Thomson family, which still controls about 55 per cent of the financial and professional information group through its holding company, Woodbridge, is growing impatient with the pace of change after a year in which shares have fallen by 10 per cent.
It’s fair to say that forecasts for last week’s anticipated QE2 announcement were far more wide-ranging than usual, at least when compared with more conventional central bank or economic data announcements.
But it also turns out that taking a closer look at the type of institution doing the forecasting, and how, may reveal some interesting insights too. Read more
Thomson Reuters and the broker-dealer ICAP are in talks with US and European banks about trading the renminbi on electronic platforms for the first time, according to the WSJ. Both companies began allowing electronic trading in Hong Kong last week among a small group of traders. But the talks are a milestone for liberalising the role of the renminbi in international currency markets, moving beyond the current restriction of its offshore spot market to over-the-counter trading by Hong Kong banks. Even so, variations between the offshore spot and onshore markets could cause headaches for the Chinese authorities, which strictly regulate the latter. Of course, the renminbi would be entering a surging market. Daily trading volume in spot FX has jumped 50 per cent to $1.5tn since 2007, The Banker reports.
Thomson Reuters will on Wednesday unveil the biggest overhaul of its markets division since the merger that formed the financial and professional information group was completed two years ago this week, the FT says.The company will create two simplified web-based platforms, one aimed at enterprises such as large banks, the other aimed at individual users such as small hedge funds. Thomson Reuters hopes the platforms will distinguish the company from Bloomberg, its arch-rival, which invested heavily through the financial crisis but has remained committed to its one-size-fits-all terminals.
At least seven private equity firms and two trade bidders are poised to submit first round bids in the next week for Interactive Data Corporation, the financial data group majority-owned by Pearson, owner of the FT. Likely first round bidders include KKR, Carlyle, Hellman & Friedman, Bain Capital, Apollo, Permira and Providence. Interested trade bidders include Thomson Reuters and McGraw-Hill. Offers could come in at 15-25% above IDC’s Jan 14 share price of $25.40, say bankers, valuing the company at $2.7bn to $2.9bn.
From the FT — some giant leaps for robot-kind in the world of trading:
The arms race in trading technology is set to intensify this week as Thomson Reuters, the news and market data company, on Monday unveils a service for “high-frequency” traders allowing them to make split-second trading decisions based on news articles “before the information moves the market” . . . Read more
There’s been some consolidation in the world of FX electronic trading platforms on Monday.
According to a statement released by foreign-exchange platform FXall, Citigroup has reached an agreement with the company to sell it its LavaFX foreign-exchange electronic trading platform for an undisclosed sum. Read more
Okay, this is conjecture. The opinions expressed here belong to the author and not to the Financial Times. Reader beware, etc. Check your own facts…
The real reason Thomson Reuters has just agreed to shell out £12m to acquire Breakingviews, the Lex-copycat analysis service, is because the organisation couldn’t think of a name for its own commentary offering, built up at vast expense over the past 18 months or so. Read more
Bloomberg, the financial information company, on Tuesday won the auction for Business Week with an offer between $2m and $5m for the US financial magazine. The deal to buy the journal from McGraw-Hill came as Thomson Reuters, Bloomberg’s rival in data terminals, was finalising a takeover of Breakingviews.com, a UK-based financial commentary website. Bid details could be revealed on Wednesday.
Still blaming analysts for being inaccurate, slow or incapable or predicting anything remotely of use? Pah, so 2008.
Blame the data instead. Read more
News from Thomson Reuters that growth in its financial data division had slowed but that it would still hit its growth and savings targets on Tues highlighted the transatlantic disparities in the share price of the dual-listed group. The group’s Q2 earnings – the first since Thomson Corp’s April takeover of Reuters – showed pro-forma revenue growth of 11% and underlying operating profit growth of 15%. The £7.9bn ($15bn) Reuters acquisition skewed reported figures, with revenues up from $1.81bn to $3.13bn and an impairment of assets that are expected to be sold, cutting net earnings from $377m to $173m. In both the UK and Canada, Thomson Reuters has become one of the most shorted stocks in its sector, Deutsche Bank noted last week, reflected in violent swings in the group’s shares, particularly in London, where it trades at a discount to the Canadian listing. Why the difference?, asks Lombard.
For a business that makes its money from supplying financial data, Thomson Reuters could not have got off to a more unfortunate start, as the company was forced to disavow the information on its customers’ screens about its own share price. Early into the stock’s first trading session in London, Reuters terminals showed the stock trading at a double-digit discount to the £18.26 opening price. Traders with Bloomberg terminals, however, were less panicked as Thomson Reuters’ rival had calculated the opening price at £17.20. By the end of the day, both agreed the closing price was £15.60 but one showed a fall of 14.6% and another a drop of 9.3%. Thomson Reuters was forced to admit that its own screens were showing the wrong opening price.
Thomson Reuters Corp debuted on Thursday as a global information company, hoping a portfolio of products from financial to legal and health-care will help it ride out a financial industry downturn, reports Reuters. Shares of the company, formed by Thomson Corp’s $16bn-plus cash and stock purchase of Reuters, were to start trading in London, Toronto and New York. The FT examines the background of the merger, while Lombard looks at the anomalies and complexities of Thomson Reuter’s listing process.