Talk of FX multi-dealer platform 360T may be sold for $750m. How does that compare to FXall sale price?

The WSJ ran a story last week that privately held FX multi-dealer platform 360T which provides FX trading services to over 1,700 institutional clients, and which back in 2012 sold a stake to private equity firm Summit Partners, could be in the process of being sold, with a suggested price tag of around €600m ($750m). Reuters carries a story saying that Jefferies have been hired to handle the sale, which is expected to complete before the summer.

Update on 16 June: Reuters news wires talking about Deutsche Boerse being the possible buyer for 360T.

Unlike the other major platforms, 360T does not publish average daily volumes (ADV), so it’s a little difficult to compare them.

However, back in 2103, Carlo Kolzer, CEO of 360T was quoted in FX Week saying that ADV for the whole of 2012 averaged $47bn/day. At that same time, the largest multi-dealer platform FXall, having recently floated was in the process of being bought by Thomson Reuters, for $625mln.

The FXall ADV for 2012 was $88b/day, and stated at the time of the sale that they had 1,000 institutional clients (in 2013 FXall ADV was $107bn/day a yearly increase of 21%, and in 2014 $129bn/day a yearly increase of 20%).

Assuming 360T volumes grew in-line with FXall at around 20%/pa, then the 2012 ADV of $47bn/day would be showing an ADV of close to $81bn/day in 2015 – which may actually be under stating the volumes, and I would not be surprised to find out that 360T ADV for 2015 were closer to $100bn/day, given the last set of Bank of England FX volume figures that show MDP volumes continuing to grow.

Nonetheless, plugging these volumes into the following table we can compare FXall and 360T valuation along two metrics.

A) Cost of platform per $bln of volume traded: Here we see that 360T is slightly more expensive at $9.3mln per $bln vol traded, compared to FXall cost of $7.1mln per $bln vol traded.

Interestingly, Hotspot the ECN that was sold to BAT Global Trading for $365mln in April this year worked out at $14 per $bln vol traded, was much more expensive than either 360T or FXall, although BAT were perhaps prepared to pay a scarcity premium for an FX ECN as part of their longer term strategy in FX.

B) Cost per institutional client: Here we see that the cost per institutional client on 360T is $441k compared to $625k on FXall at the time Reuters bought them.

Platform valuationsTable comparing FXall with 360T (and Hotspot)

Given that we don’t have access to the financials and cannot compare EBITDA, based on these basic calculations a price tag of $750m doesn’t sound expensive for 360T.

In terms of potential buyers, given the changes in market structure, the move to greater capital efficiency, and talk of FX clearing, 360T could be a strategic acquisition for one of the exchanges looking to develop their client clearing propositions and move closer to the bank to client flows? Alternatively, someone like Bloomberg could be interested in the platform, to extend the footprint of their FXGO platform.

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