Interactive Data’s agreement to acquire Chicago-based high performance trading infrastructure specialist 7ticks LLC marks a strategic initiative to take advantage of what the company sees as perhaps an 18-month window of low latency investment opportunity. The acquisition gives a much-needed boost to Interactive Data’s low latency delivery strategy.
The 7ticks deal, terms of which weren’t disclosed, gives Interactive Data a proximity hosting platform to complement both its own network – in which it has invested significantly to improve performance – the direct and consolidated feed offerings that makes use of it.
The company will form part of a new Real-Time Market Data & Trading Solutions group, which will also include Interactive Data’s data feed services, the Managed Services group and the eSignal suite of terminal services. Interactive Data has named Jeff Banker, formerly managing director of strategic market development, to lead the group as executive vice president.
“The marketplace for exchange access has evolved quickly over the past two years,” says Banker, “incrementally shifting from consolidated feeds to collocated services with direct feeds. We concluded that there’s perhaps a 12- to 18-month window in which firms expect to put significant investment into the low latency infrastructures they need to be successful in the market.”
“7ticks is focused on providing collocated, low-latency managed services,” he says. “They allow a firm to outsource their market data and/or trading infrastructure to the 7ticks platform, which offers neutral access to global market centres with full latency transparency.” Services from 7ticks will be marketed as Interactive Data 7ticks following the acquisition’s completion.
7ticks specializes in providing direct exchange access, proximity hosting and other support services for ultra low latency electronic trading. It manages collocated trading infrastructure on behalf of clients, offering neutral access to third-party capabilities like real-time market data feedhandlers, latency measurement, execution engines and pre-trade risk management controls.
Typical 7ticks clients include proprietary trading groups, hedge funds, investment banks, brokers and independent software vendors. The company operates hosting facilities in Chicago, New York metro area, London and Frankfurt. To date, it has specialised in North American derivatives, options and commodities markets. With Interactive Data’s backing, 7ticks is in the process of increasing its U.S. equities coverage and has plans to expand further into Asia and Europe this year.
Interactive Data had been looking around the marketplace for a strategic fit for two years before deciding to approach 7ticks. It took a look at several other prospective acquisition targets during that period, among them Wombat Financial Software, which was acquired by NYSE Euronext and is now part of NYSE Technologies, London-based Fixnetix, which remains independent, and the now-defunct Xasax.
Similarly, Interactive Data wasn’t the only company interested in 7ticks. According to Howard Barnstone, vice president, acquisitions and alliances, at Interactive Data, “7ticks had been approached by several potential suitors that considered investing in its business, but in the end decided to work with us based on our relationships and aspirations. It was clear that 7ticks’ strategic vision was in line with ours.”
The acquisition to acquire privately owned 7ticks – part of the Bigticks incubator group – is expected to be completed in early 2010, contingent upon closing conditions. Interactive Data expects to retain all of 7ticks’ 42 full-time employees, including its leadership team. This includes managing director Joe Bigane, who was previously an Interactive Data executive, and CIO John Heflin.
Assuming the transaction closes in early 2010, Interactive Data anticipates that the acquired business will be accretive to earnings by 2011 through a combination of planned revenue growth and operational synergies.
The appointment of Banker to lead the new group comes as no major surprise. Banker has been close to Interactive Data’s acquisitions activity for some time; he was involved, for example, in the company’s assessment of Telerate, a potential target it decided to pass on.
Perhaps more of a surprise is the fact that Banker will report directly to Interactive Data president and CEO Ray D’Arcy, who took over from retiring Stuart Clark last year, rather than to Institutional Services group president Mark Hepsworth, the former ComStock executive who has held the Real-Time Services remit since 2005. Reporting to Banker, meanwhile, will be Carsten Dirks, managing director, Interactive Data Managed Solutions; Jay Kilberg, managing director, Feed Solutions; and Chuck Thompson, president, eSignal.
Interactive Data says the Real-Time Market Data & Trading Solutions group’s task is “to tightly integrate its suite of real-time market data and innovative, hosted technology services and solutions to more effectively capitalize on opportunities in the wealth management and electronic trading sectors.”
According to D’Arcy, Interactive Data’s value proposition “is more compelling when we approach customers with a suite of integrated, real-time offerings that can include global real-time market data delivered via low-latency digital data feed services, a wealth management workstation, or a customized, hosted web solution.”