Thomson Reuters’ acquisition of FXall, which provides electronic FX trading, gives Thomson access to FXall’s customers and means those customers could enjoy an expanded product line and greater liquidity. Thomson Reuters operates one of the main electronic platforms for inter-bank foreign exchange trading, while FXall’s more than 1,300 clients are corporate treasuries, asset managers and brokers.
“This is a great move for Thomson,” says Peter Kane, a partner at Greenwich Associates, a financial services research firm. “They’ll bring the corporate and investment community closer to them, which they need. And they’ll be able to bring extensive IT and finance resources to a business that will probably need those resources to move to the next level.”
Jeanne Capachin, a research vice president at IDC Financial Insights, agrees that the acquisition should benefit FXall’s customers. “There’s a potential for more liquidity, as well as an owner in Thomson who is very committed to the corporate market,” Capachin said in an e-mail.
Kane says the deal is also a plus because it will result in some consolidation in online FX trading. “There are quite a few players out there. There are a lot of FX aggregators and FX brokers in the electronic space,” he says. “I think the space needs to be consolidated for efficiency.”
Thomson Reuters will pay $22 per share for FXall, putting the total value of the deal announced yesterday at close to $625 million. On Friday, FXall shares had closed at $15.70.
Capachin notes that when FXall went public in February, a number of banks that had backed the platform took the opportunity to cash out. The IPO valued FXall at just $12 a share, vs. the $22 Thomson Reuters is offering.
“It’s too bad the banks were so quick to sell out,” she said. “My guess is they wanted to get some revenue on their books in Q1 this year, so settled for a weak price in the IPO.”
Greenwich Associates research shows that worldwide, about 60% of big companies and financial institutions that trade foreign exchange do some of that trading electronically. Kane says that while that number hasn’t changed much, the portion of their trades that such customers do electronically has grown over the past two to three years, to 45% to 50%.
“More people are doing more volume through electronic means,” he says. “If I can transact a piece of work electronically, I don’t have to call around on the phone, I have a transaction that’s managed efficiently through straight-through processing, [and] my confirmations are automatically done.”
The press release announcing the acquisition is here.