Microsoft buys near 4% stake in London Stock Exchange | Hacker News Reader

Microsoft buys near 4% stake in London Stock Exchange

cnbc.com

46 pointsalmog23 comments

Buying equity in your customers so they go with your cloud is a new level of embarrasing.

The question is not how and what but why? Is the RoI of IT even lower than London exchange ?

The IT business has been a bit shaky lately, so diversification makes at least some sense.

Although the bigger question is why LSE, and why now? I'd imagine London to be waning as a financial center post brexit, especially given the Russian situation.

The fact it's waning makes it cheap AND have good potential for out of the box thinking. I d imagine that when on the verge of despair, they d reduce regulatory burden for instance.

I live in Hong Kong, we're waning currently, and Singapore is slowly eating our lunch, well they proposed to allow for non voting shares recently, an heresy before, to try and seduce a few IPO candidates.

Before Brexit the LSE stood to lose a ton of value from Brexit.

After Brexit the LSE stands to gain a ton of value from its eventual reversal.

NASDAQ recently made the announcement to go all in on AWS, I think. I know this is not the same thing but may be something like that or a partnership of some sort is coming up?

That LSEG-MS partnership is not a speculation but a detail mentioned in the news report:

  "LSEG has a contractual agreement over the 10-year period to spend a minimum of $2.8 billion on cloud-related products with Microsoft"

I'm guessing that this 4% stake is possibly LSEG's payment to MS in equity, but it's a guess, it's not presented this way in the item.

i think the NASDAQ AWS agreement was to only move data products like historic data and maybe research clusters to the cloud. I think the exchange itself is still going to be running in the usual location.

NASDAQ has moved the matching engine to AWS Outposts

https://www.nasdaq.com/press-release/nasdaq-completes-migrat...

I cannot help but think this is going to end up being a huge shitshow.

I hate AWS with a passion.

Can someone please explain to me how can a company by stake in a stock exchange?

How can an exchange even have stocks for sell?

How do they profit? What will MS gain from it?

> How do they profit?

By charging trade and data fees.

> What will MS gain from it?

Equity exposure to those cash flows. And a strategic tie-up that complements the cloud business.

> a strategic tie-up that complements the cloud business.

it's a strange strategic tie up - i mean, it's strategic in terms of cloud business and enterprise products, but many companies buy microsoft enterprise products and services, and you don't see MS purchase equity shares of said companies.

Microsoft isn't an investment holding company - i would argue that microsoft shareholders would prefer that microsoft return capital back to shareholders, if they cannot find a suitable investment, rather than purchase equity holdings in a company that does not produce business synergy.

They are in a position to build platforms that make cryptocurrency trading less attractive, and presumably that demand for liquid trading has to go somewhere.

Stock exchange is not the stock market. It is just a platform or location where stocks and other securities are traded. They provide a system where stock trades can be made.

Unlike crypto exchanges they do not even need to hold or touch the stocks.

It is a company like any other. Just that service provided is pretty rare.

Stock exchanges are businesses like any other (albeit heavily regulated). Their main product is a marketplace for people to buy and sell stock.

While they have many revenue streams, the typical ways they make money are through exchange fees (they charge fees for traders to buy and/or sell) and listing fees (you pay to have your stock listed). They also often sell data.

The exchange is also just a normal company. For example Deutsche Börse AG is a public company, listed on their own stock exchange (Frankfurt).

Would it be so weird if Microsoft bought a % of eBay? Or Coinbase?

Tip for understanding finance: replace every occurrence of “share”, “instrument” and “security” with “apples”

> Would it be so weird if Microsoft bought a % of eBay? Or Coinbase?

i would guess it is strange. Microsoft isn't a holding company like Berkshire is, and i would imagine that the decision to invest in equities should be made separately by shareholders themselves, instead of having microsoft make the choice.

Unless if the equity purchase has business synergy to microsoft's existing businesses, i don't see why they did it.

LSE also bought Refinitiv from Reuters few years ago.

The bulk of your question has already been answered but this one remains:

> What will MS gain from it?

I think this is an interesting question. It has been a minute since I worked in this field so my info may be out of date.

My understanding is the LSE runs on MelliniumIT's trading Engine and this is UNIX based?

One would think MS is looking for a way to market its cloud. "LSE runs on Azure and you should too" but in the case of the most valuable component (the matching engine) - I believe it runs on something like RedHat?

So perhaps MSs spin will be "we love Redhat as well and LSE runs on our RHEL servers?"

Microsoft's gain here is that they hurt their competitors, and they have demonstrated that they are willing to spend virtually unlimited sums of money to do that in certain cases.

When MS bought HoTMaiL, it was running on Unix. So, MS forced them to switch to Windows. And the service failed. So MS doubled the number of computers to throw at the problem, and forced them again. And failed again. And MS doubled the number of computers to through at the problem again, and finally HoTMaiL was now a turd but it wasn't completely totally dead.

Which meant that MS won and Unix lost. It didn't matter how much it cost or who they hurt in the process, they made that dog talk.

Same shit, different year.

Most exchanges are public companies and they do much more than provide a simple marketplace for investors. Exchanges used to be owned by their customers but many of them “de-mutualized” years ago.

LSEG, ICE, NASDAQ also have major data and software businesses that generate significant revenues.

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