The London Stock Exchange will acquire Sri Lankan trading firm Millennium IT for £18 million, it has been confirmed.
At the end of next year the LSE will switch off its existing Accenture-run TradElect platform in favour of Millennium IT’s software. TradElect suffered serious reliability issues last year when network software problems took it offline for seven hours. The system is also alleged to be slower than those at rival exchanges.
The LSE said the acquisition would cut £10 million of IT and operational cost savings after the 2011 financial year, but until the switchover it still plans to make heavy investments upgrading TradElect, at a total of £31 million.
The new platform will be “highly scalable” with “sub-millisecond” latencies, it said. The LSE’s current trading speed on TradElect is 2.7 milliseconds, compared to a reported 0.4 milliseconds at specialist electronic trading rival Chi-X.
The purchase of the 451-strong company will also provide a “broad range” of development expertise and a new revenue stream, the LSE added.
Millennium IT systems are currently in use at the London Metal Exchange, and stock exchanges on other continents. The supplier claims on its website that it has developed the “world’s fastest” trading platform, running on Intel Xeon 5500 processors.
The company has said it will be possible to process one million orders per second “using volume produced Intel two socket Nehalem servers”, within a commercially affordable environment.
Xavier Rolet, chief executive at the LSE, said it was “vital” the exchange made the acquisition to improve its technology.
“This transaction enables the Group to implement a new, more agile, innovative and efficient IT capability for our future business development, as well as running a new cash trading platform which will provide substantially lower latency, significantly higher capacity and improved scalability.”
The switchover would involve Millennium IT’s developers “gradually” replacing existing suppliers, and becoming a fully-fledged in-house software team, added David Lester, director of information and technology at the LSE.