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Screenshot of a breaking news alert e-mail from Q2 2017
Forex ECN Hotspot FX may end up under a new roof once again, if rumors of a sale of Hotspot’s parent company Bats Global Markets Inc (BATS:BATS) to the CBOE turn out to be true.
News broke late Thursday on several business news outlets that the CBOE was in advanced negotiations to acquire Bats, which has become the #2 U.S. stock exchange operator by volume. While neither party officially commented on the talks, reports were that a deal could be announced within the next few weeks but nothing has yet been finalized.
Bats went public earlier this year and has performed well, with its shares up about 40% in less than six months. After news of the CBOE talks broke, Bats shares spiked by about another 29% in aftermarket trading. Bats shares trade on its own exchange, with a market cap of about $3 billion.
Hotspot FX was first sold for $77.5 million back in 2006 to market maker Knight Capital. After Knight merged with rival Getco to form KCG and decided to focus mainly on equities market making, Hotspot FX was sold to Bats for $365 million in cash in January of 2015.
The CBOE is the largest U.S. options exchange and creator of listed options. A merger with Bats would be fairly interesting, as the CBOE still runs open outcry trading pits where humans buy and sell options ‘manually’, while Bats is a fully electronic exchange. Buying Bats would also give the CBOE a foothold in the rapidly growing business of exchange-traded funds (ETFs).