ICAP’s Spencer Reboots Market Stalwart With Bet on Digital – Bloomberg
November 18, 2016 \ 4 Comments
Full Article: Bloomberg
The interdealer broker is transforming itself from a noisy bazaar into a streamlined financial technology firm called NEX Group. The company is expanding beyond its traditional banking customers to attract pension funds, asset management firms and even corporate treasurers to its electronic trading platforms.
A brilliant move to position NEX for a buyout and reach for high margin business lines.
There are risks, however, when moving a company into a utility space. With continued standardization of formats and an increasingly cost-constrained customer base, building for-profit utilities may prove to be a daunting exercise.
Is Spencer up for it?
Will the tens of millions of dollars being spent by Silicon and Valley and Alley to develop technologies like distributed ledgers present a challenge to “owning” this space?
Time will tell.
This strategy by ICAP….excuse me, NEX, makes one of two assumptions. 1) NEX can build a formidable tool kit of electronic market solutions which would eventually turn the company into an attractive takeover target for larger players Not a bad idea and not without precedent. It was not too long ago that NASDAQ purchased a platform from an ICAP competitor for over a billion dollars, so yes Virginia, there is a Santa Claus. Hopefully, any potential NEX suitors don’t pay attention to the result of that billion dollar acquisition strategy and proceed without caution. 2) NEX can create deep pools… Read more »
As this article discusses, this move by ICAP screams like a giant “FOR SALE” sign to me. Lose the complex, messy, contract laden, potential lawsuit, overlap of the voice business. “Stitch together a mosaic of existing and developing systems and programs to deliver”. Streamline the technology offering to cut costs and improve interoperability. On the execution side, I believe the margins/marketshare of incumbent electronic execution businesses are only going to come under more pressure. I don’t like any IDB’s long term chances to meaningfully disintermediate customers from dealers. I do like the opportunities and attractiveness of the other businesses ICAP… Read more »
This makes complete sense given how inefficient and archaic the IDB market is. “Spencer is betting the house on committing everything to electronic platforms, No one else in the interdealer broker industry has done that before.” No one has done it before because the industry would rather self-sabotage by resisting change than get with the program. Kudos to him for making a bold move in the right direction!
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