Ion’s Broadway Deal Leaves Banks in a Bind

Banks that had ditched Ion Group trading software in favor of its rival Broadway Technology now have to decide whether—and how—to do it again, after Broadway’s surprise decision to sell out to the fast-growing tech giant. The deal was announced on February 14.

The tie-up removes what is seen as Ion’s main competitor in fixed income trading technology. Both companies offer a range of services, including must-have connections to scores of trading venues—Broadway is particularly strong in foreign exchange. Alternative vendors have fewer of these connections.

“This deal makes things even more complicated for banks that want to evade the Ion stranglehold. Alternatives with critical mass are very few,” says one industry consultant.

A sales director at a competing tech vendor says his firm has been in touch with banks in Canada that use Broadway, which “were not happy at all when they heard about this news. Now they have decided Broadway is in their list of vendors to replace.”

Tyler Moeller, Broadway’s chief executive, declined to comment on those claims, but insisted his firm’s products will continue to be supported and offered to clients. “Ion has never decommissioned any product across all its acquisitions and is successfully running a multiple-brand strategy in treasury and commodity management,” he says.

The deal will allow the company to beef up its research and development and offer “complementary solutions”, he adds. 

In July last year, Broadway said its customer base included half of the world’s top 50 banks. It also reported a 42% increase in year-on-year revenue, which it claimed was driven in part by three tier-1 banks moving to the firm from “other vendor and in-house fixed income systems”.

This deal makes things even more complicated for banks that want to evade the Ion stranglehold. Alternatives with critical mass are very few

An industry consultant

Barclays and Nomura are among banks that made the switch to Broadway. Announcing its tie-up in late 2017, the UK bank hailed Broadway for offering flexible and scalable services “that we can also customize”. Ion users often criticize the company for rigid, long-dated contracts and hardball negotiating tactics.

Barclays and Nomura declined to comment for this article.

In a move to cut ties with Ion, Risk.net, WatersTechnology’s sibling publication, revealed in November 2019, a group of European and UK banks are considering building their own fixed income trading software, in a project dubbed ‘Cohesion’.

Broadway is seen as Ion’s main competitor in fixed income, and gives the acquirer a stronger offering for FX—but two sources also expect the move to strengthen the resolve of the Project Cohesion banks by removing a ready-made alternative to Ion.

Shrinking options

Alternatives to Ion across the fixed income and FX space include Axe Trading, Bloomberg’s ETOMS platform, ETLogic, List, smartTrade, SoftSolutions, TransFICC, and Valantic. But the industry consultant says one problem with some of the smaller vendors “is that the minute they start making an impact on the market, there is a fear they will be snapped up by Ion.”

Barclays is understood to have recently signed a deal with Lucera, an FX trading connectivity service that is owned by brokerage firm BGC Partners. A managing director at Barclays says one of Lucera’s strengths is that it can quickly add venues if it does not have an existing connection.

Nomura, meanwhile, announced in December it was working with technology vendor Pico to build a new trading platform for FX and rates. Risk.net understands the move is unrelated to Nomura’s use of technology provided by Ion and Broadway.

The deal between the two vendors will see Ion acquire a controlling stake in Broadway, leaving Broadway’s founders and private equity investor Long Ridge Equity Partners with a minority holding. The financial terms of the deal were not disclosed.

Ion’s aggressive acquisition strategy has ruffled the feathers of banks and other financial companies. As the company has grown, it has become an ever-larger part of bank front-office tech spending, resulting in more frequent run-ins with customers that are under intense pressure to cut costs.

After Ion acquired Fidessa in 2018, some banks complained about dips in service quality and Ion’s revisions to Fidessa’s standard contract terms. Ion’s purchase of Allegro Development last year, which gave it a near monopoly in energy trading and risk software, was also met with concern among some customers.

The vendor has faced criticism for the way it prices and bundles its technology, and its uncompromising approach to negotiating and enforcing contracts. That prompted the group of Cohesion banks to consider building their own software. The project is understood to be ongoing, although some vendors and consultants are skeptical banks will commit the significant time and resources required to make the project a success.

A second industry consultant says: “The thing I keep hearing people say is, ‘Oh, I’ve got to get off Ion. We’re going to form a consortium to get off Ion.’ Or, ‘I’m gonna use Broadway instead of Ion.’ Well, you call them six months later, and who are they still using? Ion.”

Additional reporting by Duncan Wood