The London Stock Exchange looks set to acquire Sri Lanka's MillenniumIT and tap the vendor's technology for its TradeElect platform replacement.
In a deal expected to be formally announced in the next few days, the LSE is likely to pay around £50 million for the Colombo-based outfit, which also has offices in London, Boston and Mumbai.
Since introducing the £40 million TradElect platform in 2007, the LSE has come under increasing pressure from new, fast, MTFs such as Chi-X, Bats Europe and Turquoise.
Over the last few months, the exchange's new CEO, Xavier Rolet, has been looking at possible replacements that can offer faster trading and handle greater numbers.
TradElect currently offers a sluggish trading speed of 2.7 milliseconds, and Rolet says he wants to cut this to less than one millisecond. Chi-X has an average trading speed of 0.4 milliseconds.
MillenniumIT recently claimed to have developed the world's fastest trading platform with 130 microsecond order latency in testing.
The LSE's decision to buy a vendor, rather than contract for a system, should help it slash technology costs - which currently account for nearly half of total spend - in the long run.
It will also see the exchange belatedly join Nyse Euronext, Nasdaq OMX, Deutsche Boerse and Chi-X in having its own technology arm that could sell systems to third parties.
Nyse Euronext and Nasdaq OMX both sell their trading technology to third party exchanges around the world whilst last year Chi-X acquired dealing technology outfit Cicada, enabling it to create a new exchange services business unit.