TMX Group has significant plans for its energy-trading business Trayport, which it acquired at the end of 2017, according to company officials during the exchange operator's second-quarter earnings call.
Trayport has spent the past couple of years improving its Joule trader interface, and now it is time for it to invest in its broker and exchange interfaces as well, said TMX CEO Lou Eccleston.
"The dynamics of how it works is that the traders and brokers are working together to try to arrive at the transaction point," he said. "All of the improvement that you do on the broker side brings it to a place where it helps the traders as well. When you can improve what a broker can show for markets and depth of market, it helps the traders as well."
Part of the process will be creating a new a broker interface that will focus on more data mining and analytics to drive quantitative decision making and meet regulatory requirements.
The new interface will also act as a foundation for future applications that Trayport will integrate seamlessly on the platform and that clients can access through entitlements, according to Eccleston.
As part of this drive, TMX has started to divest itself of Trayport's Contigo risk-management business, which Trayport acquired in 2013, and expects to complete the process by year-end.
The legacy offering is a standalone niche application that needs separate integration with the Trayport platform and has long and complex sales cycles, he explained.
"This will provide us with additional investment for Trayport's growth and better management focus," said Eccleston.
"The risk platform is a very small piece of the revenue, only about 4% today, so it was not a component of our valuation and ancillary to our transaction," added John McKenzie, CFO of the TMX Group.
Eccleston also noted that the TMX Group might look to accelerate Trayport's growth via strategic acquisitions.
"It doesn't need to be a bolt-on," he said. "If it larger than Trayport and help accelerates Trayport, we are not limited by that. The focus in on what it does for shareholder value and how does it accelerate the organic strategy."