Microsoft to buy 4% stake in London Stock Exchange

LONDON: Microsoft will buy a 4% stake worth $2 billion in the London Stock Exchange Group, in the latest sign of blurring boundaries between Big Tech and financial firms which have raised some concerns among regulators.

LSEG said on Monday the deal would bring a “meaningful” upside to revenues after 2025 from selling more of its existing products via Microsoft apps to broaden the customer base, along with better pricing of products, but it declined to give any specific estimates.

Deepening ties between the handful of big global cloud companies such as Microsoft, Google, Amazon and IBM, and financial companies like banks and exchanges, have prompted regulators to scrutinise the links more closely.

Microsoft has a longstanding relationship with LSEG, and the exchange group’s Chief Executive David Schwimmer said that about a year ago they began talks on a more strategic relationship.

“It’s a long term partnership. In terms of the products we will be building together, I would expect our customers to start to see the benefits of that 18 to 24 months out and we will continue building from there,” Schwimmer told Reuters.

In November 2021, Google said it would invest $1 billion in CME Group to move the US derivatives exchange’s trading systems to the cloud. In the same month, US exchange Nasdaq and Amazon announced a similar multi-year partnership.

Regulators have expressed concern about the over-reliance of financial firms on too few cloud providers, given the disruption this could cause if a provider serving many clients went down. The European Union has just approved a law introducing safeguards on cloud providers in financial services, with Britain set to follow suit.

“You should assume we do not like to surprise our regulators,” Schwimmer said, when asked if LSEG has ensured that regulators were on board.

LSEG said the link with Microsoft, which gives the software group a seat on LSEG’s board, is a partnership to reap the benefits of “consumption-based pricing”, and not a traditional cloud deal.“We will continue to maintain our multi-cloud strategy and working with other cloud providers,” Schwimmer said.

Microsoft’s purchase is expected to complete in the first quarter of 2023.