IT a key element in Euronext bid for LSE

Paris-based stock exchange Euronext last week unveiled details of its much-anticipated offer for the London Stock Exchange (LSE), with IT a key element of its proposed annual cost savings of €152m (£104.5m).

The exchange believes that technology can contribute as much as €94m (£64.6m)to those savings, part of which will go to immediate ten per cent discounts to users in the form of trading fee and information feed reductions.

The core of these savings would be achieved through the rationalisation of the combined group's IT systems and platforms, and by migrating to a single cash trading system.

Euronext believes this would provide cost savings of €55m (£37.8m) following the consolidation, which would be done within 18 months of the deal's completion.

It also estimates that this would reduce overall IT expense by €40m (£27.5m) per annum, as well as cutting out a further €15m (£10.3m) in capital expenditure after the migration to a single system.

However, it has not given any indication of a decision about which of the company's two competing trading systems it will use.

Euronext runs on its NSC system, while the LSE uses its SETS platform.

Jean-Francois Theodore, Euronext chairman and chief executive, says all decisions will be made in consultation with users.

'On IT development, on the way to realise a unified single IT system, we will speak closely to users and never decide before having reached a consensus in between time.'

But the company's proposal does say it will 'actively pursue' the development of the LSE's technology roadmap initiative, which involves the migration of the existing cash and derivatives IT systems onto next generation technology.

It says this will provide not only significant operating cost reductions, but also a 'step-change' in the quality, functionality and scalability of its services to customers.

The proposal also details additional IT cost savings of €32m (£22m) from optimisation of overall IT organisation, by combining all UK IT services into a single data centre with one network and shared service agreements.

Euronext's cost savings details outperform those made by its Frankfurt-based rival, Deutsche Borse, which in January submitted an offer detailing overall annual cost savings of €75m (£51.6m), of which just €50m (£34.4m) would come from IT.

'Euronext had the original vision to address the fragmentation of European national markets by creating the first fully-integrated, cross-border cash and derivatives exchange in Europe,' said Theodore.

'Following the successful harmonisation of cash and derivatives systems across our domestic markets, we are now focused on extending the benefits of our model to a global level.'

'We have long considered that a combination between Euronext and LSE would represent a major consolidation for European markets and create the platform for the leading global exchange for the future,' he added.