LMAX Acquires FX HedgePool
Posted by Colin Lambert. Last updated: October 4, 2024
One year after acquiring Cürex Group, LMAX Group has unveiled a second FX deal aimed at expanding its product and client numbers with the acquisition of FX swaps peer-to-peer matching service FX HedgePool. Terms of the deal were not disclosed.
LMAX says the deal is the latest in its efforts to build a cross-asset marketplace that services multiple client segments – it is also the second acquisition, following that of Cürex, that is intended to extend its reach into the asset manager world.
“LMAX Group is focused on providing innovative solutions to the market, constantly exploring ways to enhance and expand our offering for institutions,” says David Mercer, CEO of LMAX Group. “We believe that with the acquisition of FX HedgePool, our combined client base will benefit from access to a wider suite of products and increased global distribution. Following this acquisition and that of Cürex last year, we now have a compelling proposition for asset managers and other buy-side participants in addition to serving our core bank, broker and proprietary trading firm segments.”
Jay Moore, CEO and Founder of FX HedgePool, adds, “This significant milestone for FX HedgePool and our community marks the start of a period of considerable innovation. The established yet agile, LMAX Group, complements FX HedgePool’s proven ability to introduce groundbreaking solutions for the modern trading desk. Both firms are aligned in delivering innovative products that set new standards for transparency, fairness and efficiency, and we look forward to an exciting future.”
The Full FX View
Much as was the case with the Cürex deal last year, this deal is very much about building LMAX Group’s penetration into the asset manager space. More importantly, perhaps, it also adds the biggest single FX product into the company’s product suite in FX swaps.
I have argued before that while the FX HedgePool concept is a good one, there always seemed to be a natural limit on the product’s growth, mainly because there are only so many matches in between buy-side firms, and the squeeze of regulatory costs on credit providers has dampened some of their enthusiasm for the service.
With this deal, I suspect that FX HedgePool will have its horizons broadened so that LMAX can bring FX swaps to its current client list – it will be fascinating to see what model is pursued by the combined firm. I remain a sceptic on the growth prospects for pure peer-to-peer in FX markets, but all-to-all is a different matter.
There is one other factor in play for HedgePool – regulation. Although the relevant authorities continue to tip-toe around the issue, there is a growing sense in the FX industry that the Trading Perimeter in the EU and UK will be enforced at some stage. FX HedgePool has been all about FX swaps, which puts it firmly in the crosshairs of this regulation – and all the costs that come with it. LMAX has an MTF, problem, presumably, solved.
In the bigger picture for LMAX, this means that only FX options remains outside its product offering and it will be interesting to see how the firm views this gap. FX options volumes are on the rise, and as we noted in an article earlier this week, non-bank firms – a sweet spot for LMAX in many ways – are starting to look at that market. This could tweak the antenna of CEO David Mercer, all while he integrates another gap-filling acquisition, for while FX swaps without doubt bring the numbers (in volume terms), FX options could be even riper for electronification.
