US exchange operator Bats is to further extend its footprint in the foreign exchange market with a planned acquisition of Swap Execution Facility Javelin SEF.
Bats says the deal will accelerate plans to offer trading of non-deliverable forwards (NDFs) for the foreign exchange market. Javelin currently offers trade execution for swaps through a combination of an anonymous Limit Order Book and a Request for Quote model.
Bats first entered the foreign exchange market in January 2015 via a $365 buy out of currency trading platform Hotspot from KCG Holdings.
“Our acquisition of Javelin underlines our commitment to the FX market and is an acceleration of our FX product rollout plans,” says Chris Concannon, CEO of Bats Global Markets. “The transaction will enable us to broaden the instruments available to trade on Bats Hotspot, adding to the platform’s existing product line-up.”
NDFs are currency contracts that enable investors to hedge against exposure to restricted foreign currencies, like the Brazilian real, Chinese renminbi, and Indian rupee, against freely traded currencies, like the US dollar. At settlement, differences between the NDF price and prevailing spot price are paid out in the freely traded currency.
According to the latest Bank for International Settlements (BIS) triennial survey, total NDF daily turnover was $127bn as of 2014, and accounted for 19% of all forward currency trading globally.
Assuming regulatory approval, Bats says Javelin will be integrated with the Hotspot platform. Deal terms have not been disclosed.