Nasdaq warns of potential revenue impact following Virtu-KCG tie up

Data and connectivity at Nasdaq could take a hit following merger as the exchange assesses full impact on revenues.

Nasdaq has said its data and connectivity services businesses could be negatively impacted following the merger between Virtu Financial and KCG.

Speaking on the exchange group’s first quarter earnings call, CEO Adena Friedman, said she expects “some impact” on revenues from the merger, although the firm is currently assessing exactly what the impact would be.

“It's not going to be significantly material, but as we said, consolidation in the HFT industry could have some impact on maybe our data and connectivity services,” she said.

Although, Friedman added consolidation in the industry has historically given rise to new players and “so the net of it has usually been a lot more muted than what you would expect in terms of initial impact.

“By the nature of the industry frankly is usually when there's consolidation, someone else sees it as an opportunity to get in and that has been the history of our business.”

Virtu Financial confirmed it will acquire KCG for $1.4 billion earlier this month, following an unsolicited bid for the market-making firm.

The deal will see Virtu extend its operating model to KCG’s wholesale market making businesses and expand the distribution of its technology and execution services to KCG’s institutional client base.

Virtu said it expects to migrate trading of the combined company onto a single technology, risk management and analytics platform.

Doug Cifu, CEO at Virtu, explained the combined entity will “expand Virtu’s growing agency execution business by offering clients a combination of Virtu and KCG’s superior algorithms and proprietary analytical tools.”

Friedman concluded: “So we see it as – on a netted basis, we're not particularly concerned, but we definitely obviously are evaluating it right now.”