Two of the world’s biggest derivatives exchanges have backed a private equity buyout of US fintech group Trading Technologies by Carsten Kengeter, the former Deutsche Börse chief, in a deal that resolves the future of a critical software supplier to the global futures market.
Singapore Exchange (SGX) and CBOE Global Markets are among the limited partners that will invest in 7Ridge, a London private equity fund owned and run by Kengeter, that will buy Trading Technologies.
The deal announced late on Sunday values TT at slightly less than $500m, according to a person involved in the talks.
SGX will invest about $200m in 7Ridge as cash and debt. CBOE said its investment was not material but confirmed it would also be a mix of cash and debt.
Chicago-based TT is widely used by banks, proprietary traders, hedge funds and brokers to connect to the world’s big futures exchanges, including SGX and CBOE. But customers have been closely watching its fate after its owner FSB Companies, the investment firm of former Chicago pit trader Frank Brumfield, hired investment bankers last year to assess its strategic options.
A year ago TT was in talks to be acquired by Goldman Sachs, which foundered as customers and exchanges balked at a key part of their trading systems being owned by one of their main rivals, according to two people involved.
In a related move 7Ridge will appoint Keith Todd, an industry veteran and chief executive of Aim-listed risk management software group KRM22, as TT’s new chief executive. 7Ridge is also expected to take a 25 per cent stake in KRM22.
“Lots of people wanted to see TT independent and not consumed by a broker or an exchange. We’ve had an alignment of the stars that’s really helpful,” Todd told the Financial Times. He added that the injection of capital meant the company “can grow organically and acquisitions are available to us”.
Tim Geannopulos, outgoing chief of TT, said there had been interest from other parties but the company had been focused on finishing an extensive internal IT project.
Many of TT’s main rivals have been consolidating or sold over the past year as customers try to save on IT costs by using few suppliers. Broadridge Financial Solutions snapped up Itiviti for $2.5bn this year and Ion, the UK-based group, has acquired Dash Financial Fidessa, and Broadway. Deutsche Börse took a majority interest in Quantitative Brokers.
Kengeter, who is also a former UBS and Goldman banker, is head and chief shareholder of 7Ridge. He set it up in 2018 after his departure from Deutsche Börse during a criminal investigation into his alleged insider trading. He paid €4.75m to settle the case. Its directors comprise Veronica Augustsson, former chief executive of Swedish trading software group Cinnober, and Catherine Furrer-Lech, former chief of staff at UBS under Kengeter.
Broadhaven Capital Partners and Sullivan & Cromwell advised TT on the deal, which is expected to close by the end of the year after regulatory approvals.