GLOBAL - Knight Capital Group has agreed to acquire Hotspot FX, a privately held firm that provides institutions and dealers with spot foreign exchange trade execution, for US$77.5m in cash.
“We believe demand for electronic foreign exchange trading will continue to rise dramatically, especially as more institutions embrace FX as a source of alpha, and not simply as a currency hedge,” said Thomas M. Joyce, chairman and chief executive officer of Knight Capital Group.
Hotspot FX, based in Watchung, New Jersey, offers institutions and dealers access to electronic spot foreign exchange trading through Hotspot FXi, an electronic communications network (ENC) for trading foreign exchange.
The Hotspot FXi marketplace provides direct market access, live and historical market data to its clients, who trade instantaneously on live, competitive, neutral multi-bank and client pricing or who enter their own bids and offers to improve their trade execution performance.
Since its inception in 2000, Hotspot’s platform now supports 24 currency pairs and executes 5,000 to 10,000 FX spot trades per day.
JPMorgan provides clearing services for Hotspot trades to Hotspot FXi clients, which include Russell Investment Group, alongside the world’s banking giants and a number of other FX clearing institutions.
Knight is a fantastic partner for Hotspot FX, said John H. Eley, president and chief executive officer, Hotspot FX. Both firms share a culture of client service and both are deeply committed to developing and driving market innovation through creative technologies and market structures. Knight has strong client relationships and deep technology resources that will help take the Hotspot FX marketplace to the next level.
The transaction is expected to close by April, subject to regulatory approvals. Upon the close of the acquisition, Hotspot FX will operate as a separate subsidiary of Knight Capital Group.
The advisers to Knight on the transaction are Sandler O'Neill & Partners and Skadden, Arps, Slate, Meagher & Flom. The advisers to Hotspot FX are Evercore Partners, Morgan Stanley and Lowenstein Sandler.
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