Dramatic cost savings through IT consolidation are at the heart of the planned merger of two of the world’s largest stock exchanges, but IT experts have raised doubts about the ambitious integration timescales.
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The “merger of equals” of the New York Stock Exchange and the pan-European Euronext exchange will create the world’s largest share trading market. At the heart of the business case for the merger is a three-year plan to save £136m a year through IT integration.
Euronext’s main technology supplier, Atos Euronext Market Solutions, will be charged with delivering the systems integration, but it faces a complex challenge as both stock exchanges are engaged in major technology projects.
Dominique Raviart, senior analyst at Ovum, said, “Any large merger is made harder when your IT is a work-in-progress. With complexity comes difficulty and more risk. It is a difficult IT integration to pull off in only three years.”
TowerGroup analyst Ralph Silva said the IT integration timetable was extremely optimistic, particularly given the potential for conflicting regulations and the need to reconcile different business cultures. “Trading platforms are very complex. I would have said five to seven years to rationalise platforms was more realistic,” he said.
The New York Stock Exchange is currently integrating the Windows-based platforms it acquired when it bought Archipelago Holdings last year. It is also rolling out Hybrid Market, a system that automates aspects of face-to-face dealings.
The exchange’s order management and messaging systems use IBM Websphere and a DB2 database on an IBM mainframe running zOS.
Euronext.liffe, the derivatives arm of Euronext, is halfway through a switch from 1,500 Sun Solaris servers to HP servers running Linux and Intel. Elsewhere Euronext uses Windows servers running Microsoft .net, having moved off an IBM mainframe platform.
Under the merger plan, three cash trading systems used by the exchanges will be replaced by a single global platform by 2009.
In the same period, three derivatives trading systems will be migrated to a single platform. Ten datacentres will be reduced to four, and four networks will be rolled into a single global network.
John Oddie, global head of exchange business units at Atos Euronext Market Solutions, said, “I do not see why we cannot do it in three years.”
New York Stock Exchange chief executive John Thain expressed confidence in the IT integration savings and timetable. “These numbers have been very thoroughly scrubbed by our technology teams over the past two weeks and we are very confident that we can deliver,” he said.