It’s already Wednesday and this column is supposed to go live on Mondays. I apologize for that. I’ve been working on a project that you’ll see on Friday, but that’s just an explanation, not an excuse. Let’s get to it.

Big Tech and the capital markets

Last week, Josephine Gallagher—our incredibly talented and well-connected senior reporter—wrote an opinion piece that centered around the idea that Microsoft could prove to be the greatest challenger to Bloomberg’s reign when it comes to terminals on Wall Street.

Jo has one of the deepest Rolodexes in the world of financial technology reporting. (Yes, I know no one uses Rolodexes anymore. Leave me alone. I’m old.) Based on her reporting, she makes a strong case that Microsoft could boldly go where other companies like Thomson Reuters/Refinitiv, Money.Net, or Symphony have come up short. Her opinion is also shaped by a conversation she had with a former Microsoft exec who told her that this exact conversation has come up during meetings, and that some mid-tier banks had once asked Microsoft to build a competitor to BBG.

Though I absolutely respect Jo’s opinion, I’m not completely on board. Disagreement is good!

Listen, when the day comes that Michael Bloomberg finally sells the company he created in the early 1980s, there’s a very good chance that it will be Microsoft making the winning bid. But I’m not going to speculate on a sale because those rumors were rampant during Michael’s failed presidential run and those rumors led nowhere. So what’s the point? When Bloomberg is eventually sold, whether in pieces or in one fell swoop, it will be the biggest story of the year…but the year might be 2050 for all we know.

What I do know is that Microsoft has been making major inroads into traditional capital markets technology, especially through partnerships. There are also thoughts that the cloud giant may look to buy a major market data specialist in the near future. If that happens, it would certainly be a game-changer. (More on that later.)

But when it comes to Microsoft and Bloomberg, I see MS as being a major disrupter in the data analytics space, but I just do not believe the executives at the company have the staying power to do the hard work of building an ecosystem akin to that of the ubiquitous Terminal. In order to create a true competitor, it would involve a fair amount of acquisitions—perhaps it would need to buy a Symphony, a FactSet, and various other workflow solutions that are specific to individual asset classes, in addition to order, execution, AND portfolio management systems. Then you need to integrate those solutions…you know…like a Bloomberg Terminal.

I could also very well be wrong in my assessment. It’s obvious that Microsoft wants to capitalize on more of that Wall Street money. The buy side already loves spreadsheets and Microsoft Office and Outlook, and they’re getting more comfortable with Teams. And next to Amazon, Microsoft Azure is the biggest cloud provider to financial institutions, though Google Cloud is gaining ground. But for me, as I wrote last week, I see more targeted inroads being made and the best place to start would be in fixed income.

To put a bow on it, as I’ve written about many times before, I think the interoperability movement has been the most important tech trend in capital markets over the last five-or-so years. That trend will continue to push forward and evolve. But the next existential threat to the industry is Big Tech. I think the disruption that will be caused by the likes of AWS, Google, IBM, and, of course, Microsoft—and I’m talking about OMSs, market data platforms, and various other trading solutions—will result in the biggest shift in the capital markets since…well, the launch of Innovative Market Systems.

Will the M&A market heat up?

Earlier this week, State Street agreed to buy Brown Brothers Harriman’s Investor Services unit for $3.5 billion. Should State Street get the integration done correctly and keep the talent, it could prove to be a savvy acquisition. Investor Services handles a lot of the dirty accounting and admin work for the buy side, but the unit has been on the cutting edge when it comes to using AI to handle these largely manual tasks. Again, if State Street keeps the talent that’s already there and augments the team with more money and its own AI expertise, it could supercharge those AI-driven efforts that are already underway.

Late last year and early this year, the merger market looked like it was starting to heat up with a few Ion deals (shocker, I know), some ESG moves, the mega S&P Global-IHS Markit tie-up, and (on a smaller scale) the Exegy-Vela merger, but it’s gone a bit quiet since then. But with State Street-BBH, and with Symphony-Cloud9, maybe the M&A gears are being greased once more.

It makes sense that there will be additional ESG consolidation in the near future, as Max Bowie wrote about recently. And that’s likely true of the wider alternative data space. And it’s expected that there will be continued deals made that involve the largest market data providers. And as long as Ion and SS&C exist, we will continue to see contraction in the OMS and EMS spaces.

But to keep beating a dead horse (I love my idioms), it will be most important to keep an eye on the big four cloud providers—if they make aggressive acquisitions in the areas mentioned above, it will likely set off a chaotic set of reactionary deals from stalwart financial technology providers worried about their own futures.

Think I’m wrong? Let me know: anthony.malakian@infopro-digital.com.

The image at the top of the page is “Saint Jerome” by Hendrick ter Brugghen courtesy of the Cleveland Museum of Art’s open-access program.