The exchange group is setting its sights firmly on the data space, as its AGM this week confirms an ambitious outlook for 2023 – with a planned merger of its data and analytics businesses on the cards. Best Execution takes a look at the new strategy.
Deutsche Borse held its annual general meeting (AGM) on 16 May, in which group CEO Theodor Weimer confirmed that it expected to reach or even exceed the upper end of its growth expectations in 2023 after a “strong start” to the year. The group expects net income for the year of between EUR4.5-4.7 billion euros, compared with the record performance of EUR4.4 billion in 2022, which saw net revenues grow by 24% to significantly exceed 2022 targets.
The focus for 2023 is now on a concrete and ambitious expansion within the data arena. That is our future. This year, we are opening a new chapter,” said Weimer in his speech to shareholders.
“Exchanges are infrastructures for the capital market. At the core of these infrastructures are data. They direct powerful capital flows. These capital and financial flows are as important as the ever-present electricity.”
The move has a financial basis – at the start of the year, Deutsche Borse had already booked 60% of its revenue. Why? “The reason for that is simple,” said Weimer. “We are systematically expanding our data and analytics business… we are reducing our dependence on cyclicality step by step.” In other words, data contracts generate regular payments, and thus make income much easier to plan.
A new direction
The group’s new strategy, ‘Horizon 2026’, therefore centres around this data focus, with a number of key pillars. According to a spokesperson for the group, speaking to Best Execution this week, the new strategy will be presented this Autumn and will include both a “trading & clearing” segment and a “data & analytics” segment.
The data & analytics pillar of the strategy will include the ‘friendly’ acquisition of Simcorp, with a planned financing of around EUR4 billion to acquire at least 50% and possibly much more. The deal is designed to close a gap in the Deutsche Borse value chain, which currently covers the design and management of investment portfolios as well as the areas of risk management and reporting. In future, the exchange also wants to prepare quotations for executing trading strategies, accounting and settlement – in other words, boosting its capacity for the buy-side back office function.
Another aspect is the 2023 merger of the group’s data and analytics businesses: Qontigo (which provides the STOXX and DAX indices) and ISS. Qontigo has been working with Simcorp for many years, while ISS has a focus on sustainability data. Through the planned merger, Deutsche Borse plans to create a leading provider of high-quality indices and sustainability data that will be “large and attractive enough” for a potential IPO in a few years’ time.
“Pie in the sky for now, but much more than just a dream,” said Weimer.
Big ambitions
Together, ISS, Qontigo and SimCorp will become a new growth segment for Deutsche Börse Group, renamed ‘investment management solutions’ as part of a shift from pure data and analytics to a broader focus on software and services solutions for the industry. “We are increasing our share of the existing data and analytics business from 15% to 24% – to more than EUR1.2 billion in net revenue,” revealed Weimer.
The group is also focusing on its digital offering. In February, it entered into a strategic partnership with Google Cloud, with the goal of increasing its proportion of computing power in the cloud from 35% to 70%,
“The partnership with Google Cloud will give us the opportunity to build a complete ecosystem for digital assets. Together with Google Cloud, we are building a digital platform for assets that will make non-securities tradable in a secure and trustworthy manner in the future,” revealed Weimer.
“Together with Google Cloud, we will work to advance our data strategy [and] expand our infrastructure for the markets of tomorrow.”
©Markets Media Europe 2023
