Institutional FX Provider, Hotspot, Priced at $300 Million as KCG Looks to Bag a Good Buy

Leading market-making firm, KCG Holdings (KCG), is believed to be searching for a buyer for its currency trading unit, Hotspot. Bloomberg reported that KCG is working with Jefferies Group LLC on the sale. The firm is believed to be in touch with a number of institutions including; Nasdaq OMX Group, CME Group, Intercontinental Exchange, Deutsche Boerse AG, and London Stock Exchange Group. The move comes two years after Knight Capital was expected to sell Hotspot in order to raise money for its technical glitch that caused over $400 million in losses.

The report follows on from KCG’s announcement today, that in its quarterly earnings it plans to sell the unit. According to Bloomberg, KCG is in discussions with a number of securities firms, people close to the matter reported.

KCG Holdings, a merger between Knight Capital and Getco in 2012. reported its quarterly earnings, the financial services firm‘s data showed that its FX unit saw record trading volumes in September, coming back on the recent burst in Volatility .

ECNs in 2000

Hotspot likes its peers, Currenex, FXall and Lava, has been involved in significant buyouts. Knight Capital acquired the multi-dealer portal in 2006 for $77.5 million. Of the pact, FXall was the most costliest outfit, when Thomson Reuters purchased the firm for $625 million in 2012. Currenex was sold to leading custodian bank, State Street for $564 million in 2007.

Multi-bank trading portals (MDP) have been playing cat and mouse with their arch rivals, the banks offering the single-dealer trading platforms, regulatory and market changes have supported one portal against the other.The Best Execution mandate has supported MDPs as firms look to take heed of multiple price sources that provide the best pricing and execution. However, banking giants such as UBS and BNP Paribas have been enhancing their technological capabilities. UBS’s Neo platform offers a full multi-asset trading with a host of research and trading applications.

Hotspot has been a strong player in the institutional market, it sits one tier below the main dealers such as Reuters, EBS and FXall. The firm has been expanding it offering to cater to the growing number of buyside traders who are including currencies in their portfolios, the firm recently launching its dark pool for FX trading.