London Stock Exchange Business Services Limited, as the Sri Lankan entity will be known, will house and operate the Group’s capital markets infrastructure business. The first of its kind for the Group, which comprises 22 companies including London Clearing House, FTSE Russell and Borsa Italiana, it could account for 20% of the Group’s headcount in the future.

Business Services Limited will house all technological services for the Group, with the exception of software, managing the servers that run the software supporting transactions for example, and the networks that enable communication between the servers and security concerns  that go with the technological infrastructure.

Deemed a ‘centre of excellence’, they will also be constantly looking at how to become more efficient, explained Business Services Limited Country Head Rohan Paulas. Low latency (or lag) is a much-discussed topic in the capital markets business, where the difference of a microsecond could either make you a 100 million or none at all. “We will be required to be innovative and to unceasingly become faster and more accurate,” he said.

The first client within the Group will be London Clearing House, with support for the other companies in transition. “We have already decided to offshore as much as possible,” said Paulas, and the Colombo centre can take on more companies with the addition of a few more personnel, having achieved economies of scale.

[pullquote]Apart from cost competitiveness, the geographical location – being over three hours ahead of European timezones – played in favour of Sri Lanka beating out other destinations under consideration[/pullquote]

This is not LSEG’s first foray into Sri Lanka, already owning Sri Lanka’s Millennium Information Technologies, which it bought out in 2009 for stock and cash, valuing the company at $30 million. MillenniumIT’s software are used by exchanges within the Group, including the London Stock Exchange as well as a number of emerging market exchanges. The Colombo Stock Exchange is also powered by MIT.

The presence of MillenniumIT alone, however, does not explain the choice of Sri Lanka for the strategic in-housing of the Group’s technological services, but bodes well for Sri Lanka to become an attractive destination for international high energy, high-end businesses. Apart from cost competitiveness, the geographical location – being over three hours ahead of European timezones – played in favour of Sri Lanka beating out other destinations under consideration including India and the Philippines. Sri Lanka’s rising rank in the Ease of Doing Business Index, as well as accolades as an offshoring destination added weightage; but perhaps, more importantly, LSEG is confident that Sri Lanka has the “high-end” talent pool required to operate on a global stage.

Enthused by the support of the government in facilitating and accelerating the process, Group Head of Shared Services Martin Ryan called Sri Lanka a “natural fit” and said that they hope to have hired about 400 Sri Lankans in 33 disciplines of technology by the first quarter of 2017; Business Services Limited is expected to go live in September and be operational at full tilt by the end of 2017. It also hopes to attract expats back to Sri Lanka, branding it as an ‘island lifestyle and a world class opportunity’ offering, and is happy to play ambassador to slowing the brain drain experienced by Sri Lanka.

LSEG Executive Director of Exchanges Technology Duminda Liyanwela added that LSEG’s proposed $30 billion M&A with Deutsche Bourse is unlikely to have any effect on the support services centre being set up in Colombo. The LSE shareholder’s vote for approval of the proposed merger is expected to be held in July, after the 23 June Brexit vote.

The state-of-the-art facility is to be set up in Tripoli Market, Colombo 10, on a land extent of two acres obtained on a 10-year lease, and is expected to combine heritage with Silicon Valley fintech feel, according to Ryan. Proximity to the Fort and Maradana railway stations was a major consideration in choosing the location, said Liyanwela, as it allows access to those beyond Colombo to commute daily as well. LSEG is unforthcoming about the quantum of the investment, saying only that it is significant, even though the number is bound to show up in its next annual report.

 

[Pic caption: (L-R) Business Services Limited Country Head Rohan Paulas, LSEG Group Head of Shared Services Martin Ryan and LSEG Executive Director of Exchanges Technology Duminda Liyanwela]