FT : Thomson Reuters Regulatory Scrutiny Situation

Monday, May 14, 2007

For Tom Glocer, chief executive of Reuters, a proposed deal with Canada’s Thomson is unreservedly good news.  If it goes ahead, he will get to run a much bigger group…..Reuters and privately held Bloomberg already dominate that end of the market. Bloomberg, which makes more money from fewer terminals, is the higher-priced and, many feel, superior option.  Putting Thomson and Reuters together, with significant capacity for cost-cutting, could well provoke stronger competition, at least on price.  It could be argued that the merged Thomson-Reuters would still face an uphill struggle in taking on tightly managed Bloomberg.  In fixed income, for example, the two had a combined 18% of the market versus Bloomberg’s 38%, according to a 2005 Thomson presentation.

Financial Data Revenues

Meanwhile, competition to provide the financial data fed through terminals is hotting up.  New regulation, in particular Mifid in Europe, will require greater price transparency in trading and boost demand for data.  Aggregators such as Markit, which is 60% owned by banks, and stock exchanges, which are trying to sell their own data, are increasingly competing with the three incumbents.  Of course, a deal would prompt regulatory scrutiny of every market sector and product.  This could mean divestments or other remedies.  When Reuters bought smaller rival Moneyline Telerate last year, the Department of Justice made it license software to a competitor.  But the fall from three to two terminal providers should not be overly worrying.  Both Bloomberg and Thomson-Reuters would have a strong incentive to continue to distribute data from a broadening array of providers – not only to placate regulators but also to improve their products.

Reference : http://www.ft.com/cms/s/107047fc-017a-11dc-8b8c-000b5df10621.html

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