While I was still fact checking TOM’s claim over 20% of the option executions find a better price than Euronext Liffe – something bigger is released. Willem Meijer found a better price for TOM itself.

The NASDAQ OMX buys a stake of 25% in TOM with an option to expand its stake to 50,1% (press release). With this take over the alternative exchange is here to stay and gains financial muscle. NASDAQ OMX was already hosting the exchange in the polar circle. Now, the new owners will supply The Order Machine with a standalone infrastructure in London. Meaning low latency connectivity and less expensive connection lines.

Crisis for Euronext Liffe Amsterdam.

Update. One very valuable comment below deserves a better spot on this website. A better view on the matter than I’ve read anywhere else so far.

Oh good grief… learn how to read press releases. This is a great example of TOM living by the old rule: when life gives you lemons, you make lemonade.

First of all, why is ‘Hans-Ole Jochumsen, Executive Vice President Global Data Products and Transaction Services Nordics’ appearing on the N-OMX side of the press release and not a CEO/COO/CFO?

The reason is simple. This is not a vote of confidence by N-OMX looking to buy into a growing potential competitor. Basically, this is the existing TOM shareholders looking to reduce the bill for the use of the N-OMX platform.

The existing shareholders save cash, N-OMX rolls out a (new?) instance in a London data center with a small cash outlay and gets shares on the cheap.

Subsequently the marketing peeps turn it into a news item: look we’re so successful, we’re getting bought. No, your shareholders know that their equity is worth less than what it would cost them to buy (rent) the N-OMX platform. And N-OMS on the other hand knows that its platform is worth less than the price TOM shareholders place on their equity.

When you understand this, you also understand why it’s a N-OMX product man and not a corporate somebody that’s putting his name on the press release.

Update – Willem Meijer (TOM) reacts

That was a sharp analysis. Interestingly, CEO Willem Meijer of TOM was willing to react. Not as witty as the anonymous 11:15 comments, but the man has got a business to run. He has got a point, having the infrastructure supplier (NASDAQ OMX) as an investor should help. TOM is secured on all four corners of running an exchange.

TOM was set up as a joint venture between Binckbank and Optiver in 2009. It was always the intention to invite others to join TOM as a strategic shareholder after the initial start.

I see four important elements of success for a platform such as TOM:

  • Clientflow
  • Liquidity providers (market makers)
  • Clearing
  • Infrastructure

After 2009 ABN AMRO and IMC joined and strengthened these strategic pillars of TOM.

Our aim is to compete with the incumbent exchanges and make trading in equities and derivatives more efficient and innovative. This can be achieved by investing in technology and at the same time keeping trading costs low. With the recent commitment of Nasdaq OMX, I feel that TOM is very well positioned to create a good alternative for these incumbent exchanges.

For the short term the Netherlands is our first priority. We expect to have a market share between 30% and 40% in option trading in the Netherlands next year. This milestone is achievable with the current commitment of our stakeholders and can increase when other financial institutions will connect to TOM as well. After the rollout in the Netherlands we will focus on other countries in Europe as well. The current partners with their respective knowhow and network, we believe are of great value to TOM and will help us to achieve our ambitions. With the investment of Nasdaq OMX in TOM we have now secured and funded future plans and at the same time added our missing fourth strategic pillar as a partner.

I am available to answer relevant questions on this topic, should anyone need more clarification.

Willem Meijer, CEO of TOM