Yesterday’s agreement by NYSE Euronext to acquire Wombat Financial Software is another sign that the arms race between exchanges to buy up technology infrastructure companies is heating up. The NYSE deal to acquire Wombat for $200 million in cash falls on the heels of Nasdaq acquiring Stockholm’s OMX Group, a leading commercial supplier of exchange technology.

“Technology is the game in the exchange world,” writes Brad Bailey, senior analyst at Aite Group in a commentary emailed yesterday to the media. “In recent months Nasdaq has significantly beefed up its ability to develop and sell various aspects of exchange and trading technology via its acquisition of OMX Group, one of the global leaders in exchange technology development and implementation,” continues Bailey. “Now, NYSE Euronext, not to be outdone, has picked up Wombat software, which will round out NYSE Euronext’s technology offerings in the extremely demanding and rapidly changing world of trading,” states Bailey in the email commentary.

But Larry Tabb, founder and CEO of TABB Group, doesn’t see the acquisition of Wombat as a response to Nasdaq acquiring OMX. “I don’t see it as a counterpart to that,” says the analyst. “I think it gives them another acquisition and it’s certainly another feather in Duncan’s cap, but it doesn’t really help them combat or parry OMX,” says Tabb, referring to NYSE Euronext CEO Duncan Niederauer.

While OMX provides exchange technology — the market place software used to run exchanges — Wombat specializes in market data infrastructure. Over the past five years, during a period of rapid growth, Wombat built feed handlers to take direct data from ECNs and exchanges like Nasdaq and NYSE, for automated trading. Wombat also provides messaging middleware, entitlement software to track usage, APIs and tick capture software and other components.

The Wombat acquisition is a bit different from the OMX purchase, according to NYSE Euronext executives. “There is a real difference between what OMX does and what we’re doing here,” says Sam Johnson, EVP and CEO of NYSE TransactTools, a subsidiary of NYSE Euronext that will combine the Wombat market data technology with the TransactTools transaction messaging technology and the Secure Financial Transaction Infrastructure (SFTI) connectivity network. “OMX is a provider of soup-to-nuts exchange technology. Their core business is to provide technology to run markets,’ says Johnson “Our business is about providing core technology to access liquidity,” says Johnson. “We’ll do that by building out a network and a stack of technology that helps you run market data,” says Johnson. “We’re very market agnostic and open.”

Even though the Wombat acquisition relates more to market data feeds and offering low-latency trading solutions, don’t count NYSE Euronext out of the exchange technology business. Euronext has been licensing exchange technology to global markets through its joint venture with Atos Euronext Market Solutions (AEMS). However, in December, NYSE Euronext agreed to buy Atos Origins’ stake in the AEMS joint venture and to bring its technology operations in house. While buying Atos Origins' 50 percent stake in AEMS, NYSE Euronext also repurchased ownership of the NSC cash trading and Liffe Connect derivatives trading platforms as well as AEMS’s third party exchange technology businesses for 275 million euros. So, NYSE Euronext does have a comparable business to OMX.

“We provide technology to other markets, whether it’s the FIX gateway that sits in front of the Swiss exchange or the Malaysia exchange, and in some cases we provide the exchange technology,” explains Larry Leibowitz, NYSE Euronext head of global technology in an interview yesterday about the Wombat acquisition. “It seems that we can provide the soup-to-nuts solution; we can provide the exchange software, the networking the gateway, the market data distribution network that a fledgling exchange would want,” says Leibowitz.

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