J.P. Morgan Becomes Eighth Member To Take Stake in Chi-X Global

The global financial services provider with assets of $2.5 trillion, takes an ownership interest in a growing execution-venue as prospects

Chi_XThe investor group of Chi-X Global Holdings LLC, had its ownership structure reinforced by the latest member J.P Morgan which acquired an equity stake in the market center operator.

Financial terms of the transactions were not disclosed as of publication, according to the official press release from Chi-X Global.

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As per the announcement, J.P. Morgan becomes the eighth member of Chi-X Global’s ownership consortium consisting of BofA, Merrill Lynch, Goldman Sachs, KCG Holdings Inc., Morgan Stanley, Quantlab Group L.P. and UBS AG.

JPMWhile Instinet Incorporated, the Nomura Group member that founded Chi-X Global in 2008, remains the majority equity holder through an affiliate. Many of these firms are heavily involved in the execution space of both listed exchange traded securities in numerous markets, in addition to offering Foreign Exchange on the institutional and retail spectrum, directly and indirectly.

The global financial services firm lists its assets as much as $2.5 trillion, according to a description in its most recent press release, and serves millions of consumers in the United States and many of the world’s most prominent corporate, institutional and government clients under its J.P. Morgan and Chase brands.

Executing Brokers Seek Flows Through Venue Acquisitions

Commenting regarding the deal in the official press release, Fumiki Kondo, Chairman of Chi-X Global, who also holds the role of Global Head of Execution Services and
CEO of Instinet – under Nomura’s Group of Senior Managing Directors, said, “On behalf of the Chi-X Global Board, I would like to welcome J.P. Morgan to the investor group. The addition of J.P. Morgan is an important milestone for Chi-X and is representative of the support that we continue to receive from trading communities around the globe.”

In addition, comments from Tal Cohen, CEO of Chi-X Global, added in the press release,  “J.P. Morgan joins our ownership consortium at an exciting time, as each of our markets continues to enhance its performance. We remain committed to working with the industry to foster healthy and vibrant equity markets that benefit all investors.”

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Operating in market centers in Australia, Canada and Japan, Chi-Tech -the technology services unit of Chi-X Global, provides technology to its business lines and the Chi-FX platform to its alliance partner, BM&F BOVESPA.

Source: Chi-x, example snaphot of market summary for January 8, 2013
Source: Chi-x, example snaphot of market summary for January 8, 2013

The announcement follows a corporate press release from J.P Morgan Chase yesterday, of the appointment of Kristin Lemkau as Chief Marketing Officer, and in advance of the January 14th release of Q3 financial results for 2013 – to be reviewed during a conference call.

Chi-FX on the Rise

During its previous announcement in November about the deal struck to allow Brazilian banks to provide FX quotes allowing brokers to offer domestically priced local stocks to foreign investors in their respective local currency (converting from the BRL to the investors account denominated currency), Mr. Cohen commented in the official announcement regarding the progress with the Chi-FX platform, “This is a major milestone for our Chi-FX platform.”

Mr. Cohen added in that announcement, “Brazilian market participants will be able to offer their off-shore clients an automated solution for trading Brazilian equities with embedded FX rates, thereby reducing latency, broadening access and minimizing currency risk for international investors. This is an exciting time for Chi-FX and we will be exploring new opportunities to expand the platform throughout Latin America.”

The fate of Chi-X Europe (the business line started by Nomura -and subsequently sold-off) that had also been under a consortium ownership of investors with interest in the execution space – eventually was bought by BATS global markets- could be repeated if a leading venue or competitor acquires Chi-X, although it’s not clear if any such plans are in place for now.

Example of JP Morgan Regulatory Structure in Some of its Business Lines

To get an idea of the entity structure for its regulated businesses in financial products and execution services, as well as clearing, the former of these are described as offered through J.P. Morgan Securities LLC (JPMS LLC) and J.P. Morgan Securities plc (JPMS). Clearing and financing services are provided by J.P. Morgan Clearing Corp (JPMCC) and JPMS. While custody and collateral management services described as provided through JPMorgan Chase Bank N.A. (JPMCB), JPMCC and JPMS, according to information on its corporate website.

With regards to US Markets, JPMS and JPMCC are separately registered U.S. broker dealer affiliates of JPMorgan Chase & Co. (“JPMC”) and are both members of FINRA, NYSE and SIPC, while JPMCC is a registered FCM with the NFA/CFTC. Then onto the bank subsidiaries which include JPMCB and JPMS plc. From these, JPMCB is an FDIC member and JPMS plc is authorized and regulated by the FCA.

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