London Stock Exchange Group (LSEG) has confirmed a partnership with Microsoft to enhance its data infrastructure on Microsoft Azure and to develop its “next generation” of data and analytics services.
Through this strategic partnership, LSEG will enter into a 10-year commercial arrangement to migrate its data platform and other technology infrastructure into Microsoft’s Azure cloud. The London-based exchange group’s data and analytics workflow solution, named Workspace, will be interoperable with some Microsoft applications.
Microsoft will apply its Azure-based machine learning capability alongside LSEG’s advanced analytics and modelling to develop new financial solutions, providing cross-asset analytics and supporting the growth of sustainable investment and non-traditional asset holdings.
This modelling capability will be built on the LSEG data platform and will offer connectivity through Microsoft 365, with these services available on Workspace and via API.
The two companies also plan the development of a digital market infrastructure sitting on cloud technology.
Through the arrangement, Microsoft will buy a four per cent equity holding in LSEG, purchasing shares owned by Blackstone-affiliated investment funds York Holdings II and York Holdings III, Thomson Reuters and affiliates of Canada Pension Plan Investment Board and GIC Special Investments which were shareholders in Refinitiv.
Microsoft will step into lock-up arrangements with LSEG that will restrict its ability to sell LSEG shares within 12 months of purchase.
LSEG and Microsoft will invest jointly in product development for the data platform, Workspace and analytics solutions. LSEG anticipates that it will bear incremental cash costs of £250 million to £300 million for 2023 to 2025 through this initiative and will commit incremental capital expenditure of £100 million for this 2023 to 2025 period. It predicts a pick up of 50 to 100 basis points on EBITDA margin through the partnership over this timeframe.
Also, through the partnership, LSEG will commit a minimum cloud-related expenditure of £2.3 billion over the term of the agreement, which is expected to be heavily weighted towards the second half of the period as activity builds.
Commenting on the agreement, LSEG CEO David Schwimmer says: “This strategic partnership is a significant milestone on LSEG’s journey towards becoming the leading global financial markets infrastructure and data business and will transform the experience for our customers.
“Bringing together our leading data sets, analytics, and global customer base with Microsoft’s comprehensive and trusted cloud services and global reach creates attractive revenue growth opportunities for both companies.
“We are delighted to welcome Microsoft as a shareholder. We believe our partnership with Microsoft will transform the way our customers discover, analyse, and trade securities around the world, and create substantial value over time. We look forward to delivering on that potential.”
Microsoft chairman and CEO Satya Nadella says: “Advances in the cloud and AI will fundamentally transform how financial institutions research, interact, and transact across asset classes, and adapt to changing market conditions.
“Our partnership will bring together the industry leadership of the London Stock Exchange Group with the trust and breadth of the Microsoft Cloud — spanning Azure, AI and Teams — to build next-generation services that will empower our customers to generate business insights, automate complex and time-consuming processes, and ultimately, do more with less.”
