Consolidation in the foreign exchange industry is even reaching destinations where regulatory burdens are a thing of the past. The saturated Japanese market, which also the biggest in terms of trading volumes, is seeing a small deal between two bigger companies – Nippon Rad and Excite Japan.
The software company Nippon Rad, which owns ARENA FX as part of its portfolio of assets, decided to divest away from foreign exchange trading. Excite Japan, which is an online informational portal, has decided to purchase an 86.6% stake in the brokerage for ¥129.9 million ($1.15 million).
The deal values ARENA FX at ¥150 million ($1.33 million), making it a small brokerage for the Japanese market.
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The conglomerate culture that has been at the core of the Japanese and Korean economies for decades continues to dominate the market. Smaller companies are usually taken over and integrated into the services portfolios of bigger ones.
Excite Japan is operating a wide-ranging portfolio of online services, divested across multiple sectors. Most recently the company made a seed round investment in video ad network Open8.
The cultural differences on the Japanese market are material to the Western world. On this note, the biggest brokerage in the world by volume, GMO Click, is also part of the conglomerate culture, with its parent company GMO Internet being focused on a multitude of ventures in the online space.
The announcements did not elaborate on further details of the deal. One factor for M&A that is material in Europe and non-existent in Japan is regulatory uncertainty. The country was at the forefront of changes to leverage levels in the aftermath of the Great Financial Crisis of 2008. The Japanese regulators decreased leverage for retail clients in two steps, to 1:50 and then to 1:25, over a couple of years.