A mainFT scoop earlier this week may need prompted emotions of déjà vu for some readers:
The London Inventory Change Group has drawn up plans for a brand new digital markets enterprise, saying this may make it the primary main change to supply in depth buying and selling of conventional monetary property on the blockchain know-how finest identified for powering cryptocurrency.
When you’ve bought previous the whiplash of successfully listening to “I’m sceptical of crypto however blockchain has potential” rearing its head*, let’s look a bit nearer.
LSEG is, actually by the requirements of its personal inventory change, an fascinating firm. It share worth has risen dramatically over latest years amid its mixture with Refinitiv and the corporate’s continued transformation from mere inventory change (yawn) to a fully-fledged monetary information large (thrilling). Its new slogan is hardly inspiring, however can’t actually be argued with: “Others do a few of what we do, however not all the pieces we do.”
In reality, it looks like precisely the kind of techy London-listed firm that might presently be a flight threat, if it wasn’t for . . . properly, . As a latest Jefferies observe put it:
LSEG’s evolving fairness story is more and more pushed by continued momentum in its subscription-income-generating enterprise traces. The relative positioning of its index and enterprise information companies is already robust, in our view.
The “weak hyperlink”, as Jefferies places it, is Refinitiv’s “desktop franchise”, ie Eikon, ie the Bloomberg terminal competitor that’s typically invoked within the sentence “silly f—ing Eikon”. That could change with the arrival of Workspace, its new platform (however Alphaville remembers comparable chatter about Eikon when that launched again in 2010).
LSEG can also be transferring ahead in different areas, together with, natch, AI. As mainFT’s Nikou Asgari reported final month, it has discovered a good friend with advantages on this space:
David Schwimmer, chief govt of LSEG, mentioned the corporate was working with Microsoft to create “bespoke massive language fashions” . . .
Microsoft took a 4 per cent stake in LSEG in December final yr and secured a board seat as a part of a 10-year strategic partnership, marking the newest in a sequence of incursions by Massive Tech into the operation of world capital markets. Seattle-based Microsoft additionally invested $10bn in OpenAI in January.
Jefferies held an name with Paul Dragan, former head of market growth at Eikon, in July. Right here’s a part of what he needed to say concerning the Microsoft connection:
I feel it’s improbable. I feel there have been a number of layers of what was really going via once we first heard concerning the partnership between Microsoft and Refinitiv. Initially, I feel when you concentrate on perhaps the obvious piece for some, which is the cloud, Microsoft Azure providing, and so on., you must perceive the operational complexity and price for Refinitiv of accumulating all of the monetary information on the earth, normalising it, cleaning it, structuring it, but additionally delivering it to their clients around the globe. So you’ve clients in Sydney that like to obtain their US market information actually quick and actually recent and that’s costly. You might have a number of handbook work. You might have a number of infrastructure that Refinitiv has to handle to be able to make that attainable.
So having a participant like Microsoft Azure and all their information centres, all their capabilities within the cloud, will certainly have an effect on the infrastructure prices. I feel there’s some nice cost-savings potential for Refinitiv simply just by leveraging what Microsoft Azure has to supply. Refinitiv’s value of sustaining their very own infrastructure is sort of excessive and it must be refreshed. They personal the info centres, they personal the comm traces, and so on. The price of refreshing that’s fairly excessive and it has to occur each three years to be able to be aggressive, and so on. It is going to undoubtedly give LSEG and Refinitiv some cost-savings and permit them to be extra aggressive.
All of it sounds fairly comfortable. However, uh, blockchain? Actually?
We are able to affirm that Microsoft is concerned — LSEG’s head of capital markets Murray Roos instructed mainFT in world unique, previously-unreported feedback (h/t Laura Noonan):
We’ve been investigating a number of the tech and engineering . . . for a lot of months with Microsoft.
Plus Microsoft’s world Web3 lead simply kinda tweeted it out:
watch this area 👇
extra data to return quickly 👀https://t.co/n6ZeUyN5Mo
— vassilis.eth (🌆 ,🌆 ) (@TziokasV) September 4, 2023
What will we learn about Microsoft’s blockchain providing?
On the floor, not an entire lot. Chief govt Satya Nadella told Davos this year that he believed within the blockchain, however that it wanted “killer apps”. We additionally understand it had a home-made blockchain product on Azure, its net providers platform, that got canned in 2021 in favour of a third-party offering.
There’s this press release, from Could (our emphasis):
Digital Asset and main market individuals announce their plans to launch the Canton Community, the trade’s first privacy-enabled interoperable blockchain community designed for institutional property and constructed to responsibly unlock the potential of synchronized monetary markets.
Canton Community individuals embrace 3Homes, ASX, BNP Paribas, Broadridge, Capgemini, Cboe World Markets, Cumberland, Deloitte, Deutsche Börse Group, Digital Asset, DRW, Eleox, EquiLend, FinClear, Gambyl, Goldman Sachs, IntellectEU, Liberty Metropolis Ventures, Microsoft, Moody’s, Paxos, Proper Pedal LendOS, S&P World, SBI Digital Asset Holdings, The Digital Greenback Mission, Umbrage, Versana, VERT Capital, Xpansiv, and Zinnia.
Canton, the discharge says will present a “decentralised infrastructure” that may join between completely different purposes constructed with Digital Asset’s Daml smart-contract language.
This feels loads the sort of factor LSEG has in thoughts, and Microsoft are clearly concerned. We are able to’t see one other finance-oriented blockchain venture that they’re in mattress with. Nevertheless, Deutsche Börse and CBOE are listed as Canton companions whereas LSEG isn’t — so we’re closely spitballing right here. Certainly, it isn’t even clear that work has actually begun on this blockchain venture.
But when Canton is the framework . . . what’s Digital Asset?
[birdseye camera zooms out from London, planet pivots and spins backwards through time, camera zooms in on A Land Down Under]
From the Australia Monetary Overview last December:
Digital Asset, the start-up that was constructing the brand new settlement system for the Australian fairness market, has declared the ASX [Australian stock exchange] should shoulder the blame as a result of it modified the scope of the venture and by no means created a plan to repair core points because it started to unravel.
The retort from the New York-based firm comes after ASX chief govt Helen Lofthouse earlier this week instructed a parliamentary committee that “escalating delays” in software program growth at Digital Asset had been one of many key causes behind the ASX’s determination to tug the plug on the venture.
This triggered a $250 million write-down, set the crucial market infrastructure improve again at the least 5 years, and triggered a lack of religion in ASX’s functionality to handle know-how, infuriating the Reserve Financial institution and company regulator.
[FT coverage of the Australian exchange group’s hilarious blockchain misadventure here]
The ASX commissioned Accenture (who, it must be famous, are hardly unbiased on this context, given their involvement in pushing blockchain options) to conduct a overview of the saga (PDF here). Accenture discovered solely 63 per cent of the rebuild was offered to ASX for testing. A Reuters postmortem from late final yr mentioned:
Individuals engaged on the venture raised considerations that Digital Asset lacked after-market assist and that the ASX had enlisted the corporate with out testing its product for scalability, the individual mentioned, including that the concerns went unaddressed. In the end, ASX had 300 folks engaged on the CHESS substitute venture, about one-third of its headcount.
We’re fairly far down a speculation gap right here, however we expect it could actually elevate some eyebrows within the Metropolis if LSEG does find yourself in mattress with Digital Asset over this — no matter whether or not or not the latter was responsible for the ASX debacle. However perhaps Microsoft could be simply the sort of chaperone to make such an association work.
Wild hypothesis however, the larger image remains to be exceptional. A yr on from ASX’s embarrassing and ignominious blockchain blow-up, LSEG’s embrace of the identical tech feels shocking to say the least. We’ll be watching how this develops with nice curiosity.
Digital Asset declined to remark. LSEG declined to remark. Microsoft didn’t reply to a request for remark.
*This additionally isn’t the primary time LSEG has made a blockchain push — in 2017, it partnered with IBM to make a blockchain-based platform for issuing non-public shares in Italian companies via Borsa Italiana, utilizing one thing known as the Hyperledger Material body. It’s not clear how that has progressed, though Hyperledger lists far fewer “premier members” than it used to.
