Google is set to make a $1 billion equity investment in the world's largest financial derivatives exchange, CME Group.

The Chicago-based firm is also separately set to migrate to Google Cloud as part of a 10-year strategic partnership which the firms claimed would transform how global derivatives markets operate.

Under the agreement, CME Group will migrate its technology infrastructure to Google Cloud beginning next year with data and clearing services, before ultimately moving all its markets to the cloud.

CME Group allows financial institutions to trade in asset classes such as agricultural products, currencies, energy, interest rates, metals, stock indexes, and cryptocurrencies.

The firm, which reported revenues of $4.883 billion in its 2020 financial year, also provides a central counterparty clearing service, CME Clearing.

The firms said that Google Cloud’s network will allow the CME Group to scale its infrastructure, increase access for more market participants, optimise costs, and help onboard new users more easily and quickly.

In addition, the firm said that the partnership will allow CME Group to take advantage of Google Cloud’s real-time data and analytics capabilities and introduce new products and services, including risk mitigation tools, analytics services, and user-centric platforms.

To help facilitate the cloud migration of CME Group, Ken Vroman has been appointed to the newly created role of chief transformation officer.

Google’s equity investment will take the form of non-voting convertible preferred stock.

The public cloud services market is highly concentrated between a small number of providers. In August, Andrew Bartels, vice president and principal analyst at Forrester put Amazon’s share of the market at 56 per cent, with Microsoft Azure having a 33 per cent share, and Google Cloud having a 15 per cent share.

“Through this long-term partnership with Google Cloud, CME Group will transform derivatives markets through technology, expanding access and creating efficiencies for all market participants,” said Terry Duffy, chairman and chief executive officer, CME Group. “To ensure a smooth transition, we will work closely with clients to implement a phased approach.”

He added: “This partnership will enable CME Group to bring new products and services to market faster – all in a flexible and scalable environment that will create a wide range of opportunities for the marketplace.”

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