Wed. Dec 1st, 2021


A technology giant that offers top-quality online technology and equity capital does not fall for an exchange business every day. But on Thursday, CME, the Chicago-based futures exchange, said it would moves its trading system technology to Google’s cloud and sold the search group a $ 1 billion stake.

CME hopes to take advantage of the technology way’s expertise in analysis and machine learning. The decade-long deal was sealed with a piece of convertible preference share. Yet the use of that kind of purchasing power outside of Silicon Valley, even in a small transaction like this, should provoke Google’s power and reach.

Google saw an opportunity. Its cloud infrastructure business follows that of Amazon Web Services and Microsoft. But given its market capitalization of $ 1.9 billion and a cash balance of nearly $ 150 billion, a partnership with the CME seems like a smart game.

CME is the world’s largest stock market by market capitalization, with an equity value of $ 79 billion. The exchange sector is highly concentrated. The largest animals in the jungle include ICE, London Stock Exchange Group, Deutsche Börse and Nasdaq. Automation and scale have reduced trade friction.

The latest computer advances of the technological titans can create further efficiency. However, exchanges are also highly regulated and vulnerable to benign technological problems that turn into disastrous job losses.

There is not much difference between cloud providers Amazon, Microsoft and Google, another concentrated industry. However, Amazon’s market share is just over half, while Google is below 20 percent with Microsoft in between. Google does not usually accept bronze medals. Its shareholders will not mind spending $ 1 billion to hold on to a major Wall Street business.

Mergers and acquisitions by technology giants are already attracting regulatory attention given their size and dominance. Their large cash balances give them plenty of room to penetrate other sectors after large payouts to shareholders.

No one expects Google to buy CME outright. But the technology giant’s obvious interest in securities trading, the highest value form of data generation, should keep regulators and investment banks cautious. For Silicon Valley, Wall Street could be the final frontier.

The Lex team is interested in hearing more from readers. Please tell us what you think of Google’s CME connection in the comments section below.



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