Gain Capital ( acquired GFT’s US clients for….. $0

Gain Capital is to (potentially) make only back-end payments to GFT, based on volume.

LeapRate Exclusive…. Back at the beginning of December, when the Gain Capital-GFT deal was announced, we wrote that “we are fairly certain that very little money changed hands here, perhaps a couple of million dollars…”. Well it turns out that even that conservative statement we made still overstated things. LeapRate has learned that Gain Capital paid absolutely nothing upfront to GFT, in acquiring GFT’s U.S. clients.

At the end of November, GFT reported having more than $81 million in client assets in its U.S. entity, although most of those did not get transferred to Gain Capital — Gain reported a much smaller $7 million increase in U.S. client assets in December. Most of that $81 million actually belonged to non-U.S. clients of GFT, and were transferred out of the country (mostly to GFT UK) when GFT was basically forced to end its RFED regulated status in the U.S., and thus abandon the U.S. retail FX market.

The agreement also allows the former GFT clients to continue to use GFT’s Dealbook360 platform.

To quickly review what actually happened here, which we exclusively reported and review in more detail in our report from January 16, The NFA, FXDD, GFT and “excess capital” – the real story: Suddenly on the last day of November, without any prior notice or warning, the NFA informed its regulated companies including GFT that they had changed the definition of “capital”, effective immediately. NFA-regulated firms including GFT could no longer include subsidiary cash in their capital calculation — meaning that GFT was now technically undercapitalized. GFT was either unable or unwilling to move money around on short notice and as such decided abruptly over that first weekend of December to freeze all activity in U.S. client accounts, and quickly scrambled to sell those clients to Gain Capital several days later.

For more on Forex industry M&A and financings, including M&A valuation comps and a deal list dating back to 2005, see the LeapRate-Dow Jones Forex Industry Report.

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