A month since it warned on the London Metal Exchange contract(see Xchanging may lose London Metal Exchange contract (update)), Xchanging has confirmed that it will indeed lose its flagship infrastructure services deal following a decision by LME's new owners Hong Kong Exchanges and Clearing Ltd to terminate the contract early.
This means that Xchanging will continue providing services to the LME till 1 May 2014, rather than December 2014, when the contract would have been up for renewal.
Xchanging is clearly trying to salvage something from the situation since it said discussions are continuing to see whether Xchanging can provide ‘certain selected services’ to LME beyond the termination date. But these would be ‘substantially smaller scale than the current contract’. Currently, the LME is one of Xchanging's largest contracts group-wide, worth c£25m per annum, or c4% of group revenue in FY12.
Xchanging again pointed out that the termination is because of a strategic decision by the LME’s new owners, rather than dissatisfaction with the service. Either way it is a significant blow to Xchanging and its ambitions in infrastructure services, and it will no doubt now result in cutbacks within the operation. We suspect there will also be plenty of Xchanging’s competitors knocking on LME’s door right now.
Subscribers to TechMarketView’s Foundation Service can read our analysis of Xchanging’s challenges on the road to recovery here.