Friday 30 September 2016

Stock exchanges elbow into scandal-hit FX markets

John Detrixhe

Published 28/07/2015 | 02:30

Traders are pictured at their desks in front of the DAX board at the stock exchange in Frankfurt. Photo: Reuters
Traders are pictured at their desks in front of the DAX board at the stock exchange in Frankfurt. Photo: Reuters

For exchanges that historically stuck to stocks and futures contracts, the hottest new bet is challenging banks' dominance in currency trading.

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Deutsche Boerse, which runs the Eurex futures exchange and Xetra stock market, joined the battle on Sunday with the €725m purchase of currency market 360T.

It came six months after Bats Global Markets, a stocks and options specialist, waded into the business by spending €328m on Hotspot FX.

Banks have long served as the backbone of currency trading, but that could be changing following a rigging scandal and as exchanges seek new growth engines.

"I understand the rationale for 360T," said Peter Lenardos, an analyst at RBC Capital Markets in London. "The foreign-exchange markets are the largest and most liquid in the world."

Deutsche Boerse and Bats both have their roots in stock trading. Stock exchanges in the US and Europe have generally seen profits eroded by regulations that have spurred competition. Nasdaq OMX Group was among the final bidders for both Hotspot FX and 360T, according to people familiar with the matter. CME Group was also said to be in the running for 360T. The Chicago-based derivatives exchange handles about 10pc of electronic currency trading, according to Aite Group LLC.

Deutsche Boerse and Bats are both keen to diversify into currencies.

The diversification into index businesses mirrors similar moves at London Stock Exchange and Intercontinental Exchange.

Currency markets are under scrutiny as some of the biggest dealers paid $5.8bn in fines from charges that they had rigged the market.

Irish Independent

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