FXall, a trading platform for electronic currency transactions, announced it was acquiring the ‘LavaFX’ of Citigroup Inc. (NYSE:C) in order to expand their market share in the multi-bank sector.
Citigroups’ Jeff Feig, Global Head of G10 Foreign Exchange, had this to say about the deal: “LavaFX is an innovative force in the industry, having built an excellent platform with talented staff. Citi believes a multi-bank platform is best owned by a multi-bank provider, making the sale of LavaFX to FXall the right strategy for its continued growth. As a shareholder and long standing liquidity provider to FXall, Citi is confident LavaFX clients and employees will benefit from this transaction. Citi will continue to support LavaFX and contribute to its future success as a part of FXall.”
What FXall and electronic currency trading platforms like LavaFX do is offer institutional investors access to products and services from a variety of banks, as well as up-to-the-moment currency quotes.
It will take some time to integrate the two systems, and CEO of FXall Phil Weisberg said at the beginning the two systems will run separately, and will probably take toward the end of 2010 before they are working in tandem.
Weisberg, looking to market the new platform even at this stage of the process, added banks could use the system for more than just offering prices to their clients, using it for their own trading needs as well.
For Citigroup, this seems to mean a couple of things. First, they may want to divest themselves of products or services which give the impression of high-risk behavior, but more importantly, the thought going forward is currency markets could come under much heavier regulation, and the type of trades offered by Citigroup’s LavaFX could come under pressure and eventually become obsolete or regulated out of existence because of the trend which is moving toward exchange-like structures for currency trade.
FXall is thus taking a risk, and Citigroup is selling at a time when that risk can’t be measured or known. It could be a good move or result in a loss of revenue in the years ahead. It’ll take time to tell if this is a good move by Citigroup or not. At this time it’s about a 50/50 chance either way.
