LeapRate Exclusive… LeapRate has learned that embattled retail forex broker FXCM Inc (NYSE:FXCM) is very close to effecting a sale of its institutional brokerage arm FXCMPro.
M&A discussions around FXCMPro began virtually immediately after FXCM received a $300 million lifeline from Leucadia National Corp (NYSE:LUK) just under two weeks ago. FXCM stated at the time that it intended to sell non-core assets to help repay the loan from Leucadia. We (and most in the industry) understood ‘non-core assets’ to mean that everything will go except FXCM’s core retail forex brokerage franchise.
Another Leucadia company, investment banking firm Jefferies LLC, is acting as adviser and doing most of the work in finding a buyer for FXCMPro.
The timing for a sale of FXCMPro is actually pretty good. Another institutional forex ECN, Hotspot FX was acquired earlier this week by BATS Global Markets for $365 million in cash from KCG Holdings. Interestingly, Jefferies acted as adviser to KCG in helping put together that transaction. A busy few weeks at Jefferies…
FXCM has doubled the size of its institutional FX franchise from trading volumes of $8 billion ADV in 2013 to the $16-17 billion ADV range by the fourth quarter of 2014. FXCMPro provides services primarily to larger institutions and hedge funds trading currency for delivery with a Prime Broker. FXCMPro also has a partnership with SuperDerivatives called DCX for electronic trading of FX options, following OTC market conventions.
So how much is FXCMPro worth?
Well as a benchmark, as we noted above Hotspot FX was just sold for $365 million, and Hotspot does roughly double the volumes FXCMPro does, in the $32-35 billion ADV range. Which would make FXCMPro worth, in theory, in the $180 million range.
Our understanding, though, is that the discussions are around a significantly lower number, something closer to $100 million. FXCM is a very highly motivated seller at this stage, and its institutional franchise is simply not as well developed as Hotspot’s is.
Stay tuned to LeapRate as we continue to bring you the ‘inside scoop’ on all the fallout from the Swiss Franc mega-move.