Deutsche Börse has underlined its determination to push into new markets, confirming it is in advanced talks to buy some foreign exchange assets from Refinitiv, the data provider.
A deal to expand the German exchange’s share of the $5.1tn-a-day market comes only days after it unveiled an $850m deal to buy Axioma, a US risk and portfolio analytics provider.
The two sides confirmed the latest discussions after a Reuters report said Deutsche Börse was in talks to buy FXall, an electronic currency trading platform, for $3.5bn. While the Frankfurt group confirmed there were talks with Refinitiv, it described the $3.5bn purchase price and imminent signing of contracts as “entirely unfounded”.
The foreign exchange market is changing rapidly as the banks that have long dominated the market pare back their operations in response to tougher regulations and competitive pressures.
More business is moving away from banks and deals negotiated by phone, in favour of electronic platforms that connect many potential users. FXall is one of biggest operators, with nearly 40 per cent of the market, according to Euromoney. The venue pools together banks’ prices in the fragmented forex market for more than 2,300 asset managers and corporate treasurers. Refinitiv, under its previous name of Thomson Reuters, purchased FXall for $625m in 2012.
Theodor Weimer, Deutsche Börse’s chief executive, has targeted using more of the exchange’s available resources, which analysts estimate to be about €1.8bn, for deals in the data and fixed-income, currency and commodities markets. Analysts have warned it would probably have to issue new equity to pay for any deals.
The group must also hold extra regulatory capital to maintain the top credit rating for Clearstream, its international securities depository.
Refinitiv has been expected to sell assets after 55 per cent of the business was sold to a consortium involving private equity group Blackstone, Canada Pension Plan Investment Board and Singapore state fund GIC, in a $17bn deal.
Last year David Craig, Refinitiv’s chief executive, denied there were plans to sell FXall, saying that forex trading was “a crown jewel asset”.
On Thursday Refinitiv said it remained “fully committed” to investing in the forex market.
Deutsche Börse is trying to reduce its reliance on derivatives markets and settlement, which account for about two-thirds of annual earnings.
Joanna Nader, an analyst at RBC Capital Markets, said the deal was “strategically attractive” for Deutsche Börse. “In addition to creating a greater ‘critical mass’ in electronic trading, the purchase of FXall could help when it launches efforts in the over-the-counter FX clearing arena,” she said.
Axioma provides analytics to asset managers and hedge funds and will be merged with Deutsche Börse’s data subsidiary, which owns the Stoxx and Dax — two of the world’s most actively traded equity indices. The two units will be combined in a Frankfurt-based company, with Deutsche Börse owning a 77 per cent stake. To break into the forex market, Deutsche Börse bought 360T, a German venue, for €725m in 2015.
Deutsche Börse declined to comment further on Thursday.
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