Talk of ICE exchange to buy Fastmatch

Interesting to see that Profit&Loss running a story today 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.

Platform costs based on daily volumesTable comparing FX platform purchase costs

 Nevertheless, this would still be a smart deal for ICE, as Fastmatch has good technology, is nimble and is growing fast.

One Response

  1. Haha “scarcity premium”? You mean like buying high priced sewage water in a desert? Sounds like a good strategy…

    Even by your analysis that price tag is insane.

    Let’s see who wins more absolute volume in the next year between Hotspot & Fastmatch (not relative % volume growth since Fastmatch doesn’t do much real volume anyways). Especially when Hotspot already has legitimate volume & a parent company willing to take per millions to 0.

    Drew/Dmitri laughing all the way to the bank on this 1…it was a good hustle of ICE shareholders I do admit.

    Ridiculous…just Parrots & Monkies left out there

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: