It has been a long week in the forex world, and it’s only Tuesday. We began Monday with the big news that Thomson Reuters had made a tender offer of $22 a share for FXAll. The deal, valued at $625 million, is scheduled to close in the third quarter of this year.
I had planned to spend Monday afternoon putting together a write-up of the deal, along with my take on what it means for the industry. It would have been an easy article to write, since while the deal took many in the industry by surprise, upon further review, it makes complete sense.
Volume seems to be trending away from banks and toward hedge funds and non-bank institutional players. Regulations, such as the Volcker Rule and capital requirements related to Basel III, will likely exacerbate that trend over the coming years. Thomson Reuters is a giant in the interbank forex market, but had no significant presence beyond the banks. This deal puts the firm head-to-head with ICAP’s EBS platform.
Other trends worth noting include (1) the integration of news feeds and trading platforms and (2) the tendency of firms to consolidate during times of industry stress. I will be keeping an eye on media outlets such as Bloomberg and Dow Jones, as well as the traditional interdealer brokers. I have a hunch we will see more M&A activity in the near future, especially if we stay in this volume-recession..
THAT is a capsulized version of the I article I planned to write. But I never got around to it. By Monday afternoon, the “big story” became the apparent downfall of futures and forex broker PFG Best. The story, which was first broken by the John Lothian News team just as the markets were closing, involves accounting irregularities, regulatory action including the placement of the firm into “liquidation-only” mode, and an apparent suicide attempt by the firm’s owner, Russ Wasendorf, Sr. For more on the story, and to receive updates as we learn them, please visit the John Lothian Newsletter blog.
The take-away from Monday is that the financial sector tends to change in the blink of an eye. It’s best to be always on the ready for a change in plans.