07.31.2015
By Terry Flanagan

FX Trading Assets in Demand

Deutsche Boerse’s planned acquisition of foreign-exchange trading platform 360T, announced earlier this week, is the latest evidence that FX market assets are increasingly coveted.

The German exchange operator said on Sunday it would buy 360T, a provider of web-based trading technology for FX and other OTC instruments, for 725 million euros ($796 million). Reportedly, CME Group was among other large market operators interested in 360T.

“You had DB as the winner, but there were a number of other people at the table,” said Jacob Loveless, chief executive officer of Lucera, a provider of FX infrastructure and connectivity services. “At a time of low interest rates and low volatility in equities and futures, traditional exchanges are looking to branch out into new asset classes. It makes a lot of sense.”

For expansion-minded securities exchanges and trading platforms, 360T is the latest potential FX acquiree to be scooped up. Bats Global Markets bought Hotspot FX for $365 million earlier this year, and Thomson Reuters bought FXAll for $625 million in 2012.

Jake Loveless, Lucera

Jake Loveless, Lucera

The Bats deal was notable in that the Lenexa, Kansas-based exchange operator hadn’t been in the FX business, Loveless noted. Also of note is that the sale prices have been increasing for FX trading platforms, which is a function of both the businesses getting larger, and FX trading volumes broadly carrying a higher valuation.

360T is the third-largest FX trading platform behind FXAll and FX Connect, according to industry data. A company executive told Reuters earlier this year that more than 100 billion euros per day traded over the 360T platform.

“The 360T acquisition is a big number,” Loveless said. “360T has a lot of corporate flow (from non-financial companies and other hedging vehicles), which is business that is very hard to acquire and takes a long time to build.”

“There are more acquisitions to come,” Loveless said, citing FastMatch as a potential target. “There’s not a lot of assets up for purchase, and you’re talking about a massive market, something in the order of $1.6 trillion notional per day.”

Combined, 360T, Hotspot and FastMatch handle about 10% of total FX market volumes. “There is a lot more out there,” Loveless said.

 Featured image by zphoto83/Dollar Photo Club

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