NYSE Euronext Plans Global Network Of Trading Hubs

NYSE Euronext (NYX) plans to replicate two major data center units in the U.S. and the U.K. with as many as 40 smaller facilities in financial centers including Frankfurt, Tokyo and Sao Paulo, according to senior executives.

The "liquidity hubs" will offer market connections and technology services to local banks and trading firms, building upon the two proprietary facilities the Big Board parent launched to house its own trading systems.

"This is a springboard from the two data centers that we own to create other points of presence at destinations of importance around the world," said Stanley Young, chief executive of NYSE Technologies, in an interview.

The expansion is already under way and 14 European locations are seen coming online in the first quarter of 2011.

The move represents the next phase in the transatlantic exchange operator's plan to diversify from trading and listings into higher-margin hardware and system maintenance business providing high-speed access to platforms across the globe.

NYSE Euronext CEO Duncan Niederauer this year set a $1 billion annual revenue target for the technology arm to reach within five years. About $500 million was allotted to construct the new data centers in Mahwah, N.J., and Basildon, east of London. They house the company's own trade-matching engines as well as customer systems.

NYSE Euronext also is exporting its exchange systems to smaller markets around the world, like the Philippine Stock Exchange, while weighing additional acquisitions such as last year's $144 million deal for trading technology developer Nyfix Inc.

With the proprietary data centers now functional and NYSE Euronext shifting its exchanges to the new facilities, Young said the next step is to expand in other, existing data centers in key financial centers.

The plan is to add space in units run by companies such as Equinix Inc. (EQIX), Savvis Inc. (SVVS) and Telx Group, he said, rather than building any more proprietary facilities.

Young said NYSE Euronext could eventually have between 25 and 40 liquidity hubs of varying size around the globe. Some will initially focus just on collecting market pricing data, while others will function as miniature versions of the Manwah and Basildon facilities.

In locales like such as Chicago, Frankfurt, Singapore and Brazil, where NYSE Euronext already has some market infrastructure, the company aims to add more services. It also plans to move into new markets like Hong Kong and Tokyo.

"The whole notion is to provide services to our clients in places besides where we have our own markets," said Bob Moitoso, senior vice president at NYSE Technologies.

The span of each facility's offering will depend upon local customers' needs and region-specific rules. For instance, some jurisdictions may restrict the offering of co-location services, in which firms situate their servers within the same physical building as an exchange's matching engines to maximize the speed of trading.

Young said NYSE Technologies hopes to offer in many places a "wholly hosted" trading service, managing traders' hardware, exchange connections, price data and risk controls as a single package.

-By Jacob Bunge, Dow Jones Newswires; 312-750-4117; jacob.bunge@dowjones.com

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