SINGAPORE (THE BUSINESS TIMES) - Singapore Exchange (SGX) will buy the remaining 80 per cent stake in BidFX from other shareholders for about US$128 million (S$178 MILLION) cash, in a move that will expand its reach beyond foreign exchange (FX) futures into the global FX over-the-counter (OTC) market when the transaction is completed in July.
BidFX is a cloud-based FX trading platform for institutional investors. It was previously a subsidiary of TradingScreen, which had been incubating BidFX and spun it off in 2017.
SGX first acquired a 20 per cent stake in BidFX in March 2019, planning to bring together FX futures with OTC markets.
SGX said on Monday (June 29) that the synergies between the exchange and BidFX, coupled with the opportunity to support international FX participants from pre-trade data and analytics, trade execution to post-trade clearing, propelled it to buy the remaining stake.
The transaction is subject to fulfilment of certain conditions. The cash consideration is subject to certain adjustments. It was arrived at on an arm's length willing-seller, willing-buyer basis after taking into account management's forecast financial projections, based on transaction volumes and new client acquisitions as key revenue drivers, and headcount and technology plans as key cost drivers.
A total of up to US$25 million may be paid to the sellers in 2022 if certain revenue targets are met by BidFX.
Based on the audited financial statements of BidFX for the financial year ended Dec 31, 2019, the net tangible asset value of BidFX is £8.5 million (S$14.6 million) and the net book value of BidFX is £18.2 million.
Since BidFX's establishment in January 2017, average daily volumes have grown at a compounded annual growth rate (CAGR) of 57 per cent to US$31 billion in May 2020. It continues to acquire new clients, with over 100 of the world's largest banks, hedge funds and asset managers currently connected to its platform.
The FX market is the largest financial market in the world, with average daily turnover in the OTC market amounting to US$6.6 trillion by traded volume, according to BIS Triennial Central Bank Survey 2019. By comparison, the size of the exchange traded FX derivatives market is only about 2 per cent of the OTC market.
This presents significant opportunities for SGX to build on its dominance in Asian FX futures to expand into a much larger global OTC FX market.
SGX's chief executive officer, Loh Boon Chye, said the future of FX lies in the ability for market participants to benefit from price discovery, liquidity and transparency for both OTC and listed futures trading, in a single unified venue.
"BidFX is ahead of the curve in developing sophisticated electronic FX trading and workflow solutions. With BidFX as part of the SGX group, we can now serve a wider FX community with more comprehensive solutions and enhanced distribution capabilities, while bringing together the two growing and mutually reinforcing pools of liquidity," Mr Loh said.
Jean-Philippe Malé, CEO of BidFX, said the firm looks forward to contributing to Singapore's success as a central FX liquidity hub in Asia.
Pierre Schroeder, CEO of TradingScreen, said TradingScreen clients will continue to have access to BidFX via its multi-asset TradeSmart® application.
Since the start of this year, BidFX's global clients have been able to trade across both OTC and futures FX markets, with the option to have bilateral counterparty or centrally cleared FX exposures, all in a single venue with an integrated workflow management system.
SGX's FX futures franchise has seen US$3.8 trillion in traded volumes since it started in November 2013.
Last year, SGX launched FlexC FX Futures, which allows market participants to trade customisable FX futures in an OTC manner and clear transactions on SGX.
The combination of SGX and BidFX's expertise, client and distribution network and products will scale up the successes of both firms in this space, and advance SGX's global ambitions to offer end-to-end FX platform and solutions, SGX said.