Interesting to see that Profit&Loss running a story that the US futures Exchange ICE may be preparing to buy our all three shareholders (Credit Suisse, BNY Mellon and FXCM) of FX platform Fastmatch for around $200m-$250m.
As the FX market continues to fragment, and higher regulatory costs for bilateral trades start to bite, exchanges are no doubt eyeing an opportunity to get closer to the FX market by offering capital efficient client clearing/counter-party risk mitigation
solutions to the OTC markets.
It would therefore make sense for ICE as a vertically integrated exchange with a strong clearing capability, to look to enhance their position by buying a relatively small but growing FX platform like Fastmatch.
Last month, Deutsche Bourse was rumored to be about to buy 360T for around $750m. At the time, I looked at the relative costs of platforms in terms of purchase price divided by average daily volumes.
Revisiting that analysis now, although Fastmatch is the smallest of the four platforms, the proposed $250m price would make it by far the most expensive of the four platforms coming in at $27.2mln per $bln of daily volume, making it almost three times more expensive
than the 360T/Deutsche Bourse transaction (see column with yellow heading below).
But, as has been mentioned before, FX platforms are consolidating and each platform sale, raises the scarcity premium for the next transaction.
Nevertheless, this would still be a smart deal for ICE, as Fastmatch has good technology, is nimble and is growing fast.
Table below compares FX platform purchase costs