State Street has bought Currenex, the online foreign exchange trading platform used by currency traders, including banks and hedge funds.
State Street has $564 million in cash – which observers see as a handsome price – but says the purchase will accelerate its growing participation in the electronic foreign exchange trading market.
“Today’s announcement reflects our proven strategy of acquiring key technologies and platforms that enhance capabilities for our customers and expand our market share in high growth areas such as foreign exchange,” says Joseph Hooley, vice chairman and global head of investment servicing and investment trading and research at State Street in Boston.
“This acquisition also diversifies State Street’s trading customer base beyond traditional asset managers to include more active currency managers and hedge funds. The future of global electronic foreign exchange trading will be determined by who can provide the most efficient technology solutions that allow quicker access to markets and flexible, comprehensive trading solutions.”
Foreign exchange is the largest and most-liquid market in the world with trading volumes of approximately $2.3 trillion per day. According to a study by Client Knowledge, volumes are projected to grow to above $3 trillion per day by 2010 and electronic foreign exchange trading is also projected to double in volume over this period to more than $2 trillion per day.
State Street’s existing FX Connect platform has built a substantial position in institutional electronic foreign exchange trading. In December 2006, FX Connect exceeded $108 billion in a single day’s trading volume.
“Being able to offer our customers innovative trading tools through FX Connect and Currenex fulfills our goal of delivering leading-edge foreign exchange capabilities to meet growing market demand,” says Stanley Shelton, executive vice president and head of State Street Global Markets, the company’s investment research and trading arm. “The two platforms are extraordinarily complementary with almost no overlap. Once this transaction closes, we will move quickly to integrate Currenex’s technology with Global Link, our multi-asset class trading platform, and continue to invest in the platforms to deliver the most complete and technologically advanced set of products available in the market.”
State Street says FX Connect’s capabilities in electronic foreign exchange trading will combine well with Currenex’s focus on servicing high-volume, high frequency trading activity.
“This move leverages the strengths of two innovators who share a similar strategic vision of creating best of breed and flexible electronic trading solutions,” says Cliff Lewis, chairman and CEO of Currenex. “This acquisition will enable us to continue providing sophisticated customers with the market-leading tools they need to maintain their competitive edge in an increasingly complex and dynamic global environment.”
State Street expects the transaction to be neutral to 2007 results and slightly accretive to earnings in 2008.