As part of the deal, Google also invested $ 1 billion in a new round of convertible non-voting preferred shares of the CME group, the companies said in a statement on Thursday. The 10-year partnership will see CME move its data and clearing services first to Google Cloud, and then eventually its trading and other markets.
This partnership will allow the CME Group to bring new products and services to market faster, CME CEO Terry Duffy said in the statement. Google Cloud will help CME increase access for more market participants and provide new tools for developing algorithms and managing risk.
Chicago-based CME has appointed Ken Vroman to a new role of Director of Transformation to help with the transition. The two companies said they would explore ways to work together on innovations for CME Groups customers.
The move is the latest among exchange firms including Nasdaq Inc. and Cboe Global Markets Inc., which have started to expand into cloud-based software and data analytics.
Exchanges look to data and other recurring revenue streams, rather than relying solely on trading revenue, and getting those tools faster and more efficiently is a big step, said Kevin Heal, analyst at Argus Research Corp., in an interview.
Exchanges offer services including price quotes and transactions that take place in milliseconds. CME and others have expanded to offer data, portfolio management, and other services that help investors make more informed decisions. CME allows its clients to trade futures, options, liquidity and over-the-counter markets.
Cloud computing, which allows businesses to outsource IT processing and data storage to large tech companies rather than operating the systems in-house, has been one of the fastest growing areas in the world. technology industry. But Google’s cloud business lags behind market leader Amazon.com Inc. as well as Microsoft Corp. and Chinas Alibaba Group Holding Ltd.
In his earnings report last week, CEO Sundar Pichai said Google Cloud continued its momentum, but the unit fell short of revenue expectations in the third quarter.
Major cloud providers have moved into financial services, an industry that has lagged behind other markets as banks and financial institutions are often limited on what can work in a public cloud due to requirements. regulatory and safety concerns. Google Cloud has made deals with HSBC Holdings and Deutsche Bank AG, but Amazon Web Services is much more dominant in the industry.
Last month, Google put aside plans to add bank accounts to its payments app, saying it would instead focus on providing digital empowerment to banks and other financial service providers rather than us. as a provider of these services.
Google cloud chief Thomas Kurian has expanded its units, focused on solutions tailored to customer industries, and reorganized its workforce to take market share from its competitors. Last year, the divisions’ annual revenue jumped 46% to $ 13 billion.
The partnership could help give Google and CME a head start.
CME has lagged behind its peers when it comes to its data and analytics offerings, said Owen Lau, senior research analyst at Oppenheimer & Co. The partnership strengthens their product and will allow companies to innovate more. easily. It is also a vote of confidence for CME to have the help and the brand name of Google.
Google is also pushing a partnership strategy, taking stakes in companies that it sees as a strategic opportunity to advance its technologies. Last year, Google bought a $ 450 million stake in home security company ADT Inc., forming a partnership that could allow tech giants to bring smart home products to millions of new customers.
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