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I don't understand how HKEX has this much money (or can raise) to buy LSE (or invertly why LSE is worth this much). Exchanges don't do clearing so essentially j

I don't understand how HKEX has this much money (or can raise) to buy LSE (or invertly why LSE is worth this much). Exchanges don't do clearing so essentially just a glorified piece of matching software running 24/7. HKEX has their own data center in the middle of nowhere granted which I've been to and yeah more impressive than say an Equinix such HK1 but still the figures don't seem right..

hn_throwaway_99 7y ago
> Exchanges don't do clearing so essentially just a glorified piece of matching software running 24/7. You just described Google, and they seem to have plenty of cash in the bank.
- throwaway13249 7y ago
  Exchanges only have a couple of hundred customers afaiu, with the volume coming through only a couple of dozen, everyone else is through their prime broker. In other words there is a limit on how much they can pull fees up before liquidity moves elsewhere. I wouldn't be surprised too if the matching software was off the shelf.
  - derefr 7y ago
    > I wouldn’t be surprised too if the matching software was off the shelf If there exists a business whose product is “scalable real-time order-book matching software” as licensed software or SaaS, I’d love to know about it! I’m in an adjacent space, and I’d love to strike up a partnership with such folks. As far as I know, such a business doesn’t exist; all the big exchanges maintain their own core IP, much like all the big telcos in the 90s maintained their own core telecom-equipment IP. From what I know of the space, each player thinks that licensing the IP would just be either inviting a new player to the table, or more likely inviting enough new players to the table that other parts of the trading value chain would start to see value in abstracting-away and commoditizing their part of it.
    - andylynch 7y ago
      Second Nasdaq. They lead in this space. Also challenging is Aquis with the technology behind their own venue.
    - pdovy 7y ago
      I'm not quite sure how the terms / licensing for this works, but anecdotally OSE, SGX, TOCOM, BrokerTec and at least the derivatives business in Hong Kong all run on some variant of Nasdaq technology.
    - wibble10 7y ago
      Murex is going “cloud”
jbottoms 7y ago
It might be state money. Just seeing the transaction flow is gold. And once you have sold an exchange, you might never get an opportunity to buy it back.
ddeck 7y ago
It's not hard when you have government gifted statutory monopoly and are also given control of listing and clearing regulations. The government ban on any competition to HKEX means that their net profit margin was 61% last year. As activist investor David Web put it: "On top of that, HKEX doesn’t even do its job well as an exchange, because it has been exempted from the Competition Ordinance and has fees, profit margins and archaic practices that only a monopoly could get away with."[2] >Exchanges don't do clearing True, but this is HKEX, which stands for Hong Kong Exchanges and Clearing. They operate 4 clearing houses in HK. update: 61% was first 9-months. Fully year was 58%[1] [1] https://www.hkex.com.hk/-/media/HKEX-Market/News/News-Release/2019/190227news/1902273news.pdf https://www.hkex.com.hk/-/media/HKEX-Market/News/News-Releas... [2] https://webb-site.com/articles/listing170915.asp https://webb-site.com/articles/listing170915.asp
tachyonbeam 7y ago
Control over one of the world's biggest stock exchanges? Access to data? That seems like it's worth a lot of money in today's world.
Scoundreller 7y ago
They’re not just buying the LSE, but the LSE group, which also owns clearing houses and other stuff.

hn_throwaway_99 7y ago

> Exchanges don't do clearing so essentially just a glorified piece of matching software running 24/7. You just described Google, and they seem to have plenty of cash in the bank.

throwaway13249 7y ago
Exchanges only have a couple of hundred customers afaiu, with the volume coming through only a couple of dozen, everyone else is through their prime broker. In other words there is a limit on how much they can pull fees up before liquidity moves elsewhere. I wouldn't be surprised too if the matching software was off the shelf.
- derefr 7y ago
  > I wouldn’t be surprised too if the matching software was off the shelf If there exists a business whose product is “scalable real-time order-book matching software” as licensed software or SaaS, I’d love to know about it! I’m in an adjacent space, and I’d love to strike up a partnership with such folks. As far as I know, such a business doesn’t exist; all the big exchanges maintain their own core IP, much like all the big telcos in the 90s maintained their own core telecom-equipment IP. From what I know of the space, each player thinks that licensing the IP would just be either inviting a new player to the table, or more likely inviting enough new players to the table that other parts of the trading value chain would start to see value in abstracting-away and commoditizing their part of it.
  - andylynch 7y ago
    Second Nasdaq. They lead in this space. Also challenging is Aquis with the technology behind their own venue.
  - pdovy 7y ago
    I'm not quite sure how the terms / licensing for this works, but anecdotally OSE, SGX, TOCOM, BrokerTec and at least the derivatives business in Hong Kong all run on some variant of Nasdaq technology.
  - wibble10 7y ago
    Murex is going “cloud”

jbottoms 7y ago

It might be state money. Just seeing the transaction flow is gold. And once you have sold an exchange, you might never get an opportunity to buy it back.

ddeck 7y ago

It's not hard when you have government gifted statutory monopoly and are also given control of listing and clearing regulations. The government ban on any competition to HKEX means that their net profit margin was 61% last year. As activist investor David Web put it: "On top of that, HKEX doesn’t even do its job well as an exchange, because it has been exempted from the Competition Ordinance and has fees, profit margins and archaic practices that only a monopoly could get away with."[2] >Exchanges don't do clearing True, but this is HKEX, which stands for Hong Kong Exchanges and Clearing. They operate 4 clearing houses in HK. update: 61% was first 9-months. Fully year was 58%[1] [1] https://www.hkex.com.hk/-/media/HKEX-Market/News/News-Release/2019/190227news/1902273news.pdf https://www.hkex.com.hk/-/media/HKEX-Market/News/News-Releas... [2] https://webb-site.com/articles/listing170915.asp https://webb-site.com/articles/listing170915.asp

tachyonbeam 7y ago

Control over one of the world's biggest stock exchanges? Access to data? That seems like it's worth a lot of money in today's world.

Scoundreller 7y ago

They’re not just buying the LSE, but the LSE group, which also owns clearing houses and other stuff.