City Index seeks a retail FX solution

City Index's acquisition of online foreign exchange trading company FX Solutions last Wednesday (February 6) marks a significant push by the company to gain traction in the global retail FX market, particularly given the price!

The deal was an all-equity transaction worth around $300 million, according to sources familiar with the situation. That gives co-founders of the Saddle River, New Jersey-based company, Thomas Plaut and Robert Cortright, around a third of the shareholding of City Index, which is valued at around $1 billion.

Markets sources said that, for that price, the London-based retail derivatives trading company will gain 23,000 retail clients. Plaut said last year that on any given day the company sees about 100,000 tickets at around $70,000 each.

With its history firmly rooted in the UK, the deal also gives the company significant exposure to global markets that FX Solutions covers through its introducing brokers. It is not, however, City Index's first major push to expand its foreign exchange operations.

In August 2006, City Index moved to extend its reach by acquiring London-based broker IFX in a deal worth £1.80 per share or about £57.9 million. The purchase had a particular aim to expand City Index into foreign exchange, an area that it regarded as a good growth opportunity. "One of the reasons we decided to go ahead with the deal was the FX component of IFX Markets. Retail FX is a great product, and the international presence of IFX should help us expand in this area," said Clive Cooke, chief executive of City Index at the time. IFX's offices are in Sydney, Shanghai and Boston, as well as London.

Cooke went on to say that, while there would be some duplication on the spread-betting side of the two businesses, the foreign exchange component of the business of IFX would remain mostly intact, as it has a significantly greater presence in the market.

Indeed the acquisition included IFX's US-based subsidiary, IFX Markets Inc. Rumour has it that the US business failed to make any real inroads for City Index and so, by acquiring FX Solutions, the company has gained a serious player in the market. Best of luck to them both.

FX Solutions did not return calls by press time.

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