Last updated: February 16, 2012 3:22 pm

NYSE purchase marks start of new strategy

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NYSE Euronext will take the first steps in pursuit of its new strategy following the failure of its merger with Deutsche Börse, with the purchase of a stake in Fixnetix, a fast-growing UK trading technology company.

The exchanges operator will take a 25 per cent stake in Fixnetix in a deal which values the London-based group at about £100m. NYSE will pay an inital £17.5m for the stake but has an option to buy the remaining 75 per cent stake within the next three years.

The move illustrates how NYSE intends to consolidate NYSE Technologies, the IT services division that is the fastest-growing part of its business. Duncan Niederauer, chief executive of NYSE Euronext, has signalled that supplying technology and connections for trading around the world would be a focus after European antitrust officials blocked the group’s planned merger with the German exchange two weeks ago. It also wants to expand into post-trade services in Europe.

Mr Niederauer last week said the exchange had been working on alternatives in the event of the merger’s failure. Fixnetix has been exploring a full or partial sale since last summer and the two parties have been in talks since November. The UK group will use the investment to expand into Asia and the US in coming months.

NYSE Technologies is looking to connect more of its high frequency trading customers to an expanding network of trading hubs around the world. It has a target to make $1bn in revenues and operating margins in the range of 25-30 per cent by 2015. Last year turnover at the unit rose 10 per cent to $490m with operating margins of 26 per cent. It is also in talks with an unidentified broker to site its internal trading platform in its data centre outside London, with a deal expected in the second quarter.

Fixnetix is one of a number of small technology companies whose fortunes have soared in recent years by supplying tools for automated and high frequency trading. Among its products is a chip that can execute trades in nanoseconds. It was founded in 2006 by Hugh Hughes, the chief executive, who has also worked at SG Securities and the UK arm of Thales Information Systems.

Turnover at the group has surged from less than £1m in 2008 to £25m and profits of £730,000 in the year to March 2011. In December Deloitte, the professional services group, named Fixnetix Europe’s second-fastest growing company over the past five years by revenues.

The deal will see existing Fixnetix shareholders, which include venture capital groups Thematic Capital Partners and Delta Partners, sell down small holdings of their stakes. The UK group will continue to operate independently while Stanley Young, chief executive of NYSE Technologies, will take a seat on the board.

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