GFInet, the hybrid voice and online brokerage, has signed a letter of intent for a combined stock and cash acquisition of FX option analytics software provider Fenics Ltd. The acquisition (due for completion by year-end 2000) will lead to the Q1 release of a fully integrated online B2B platform for viewing, pricing and execution of currency options, says Mickey Gooch, chairman and CEO of GFInet.
GFInet, majority owned by GFI Group, provides voice-assisted and online trade execution brokerage services, along with real time and historical market data, market-specific commentary and analytics. GFInet currently offers online trading in fixed income, equity, energy and telecommunications markets (the latter through CommerEX.com). GFI Group, founded by Gooch in 1987, provides liquidity to GFInet and specialises in wholesale cash and derivative markets.
Fenics, which provides pricing software for the OTC and exchange-traded vanilla and exotic FX options markets, currently boasts 95% penetration among the world’s investment banks, with about 350 customers in 800 sites.
On 10 July, Fenics launched an Internet-based multi-dealer currency derivatives platform for the end user community through an arrangement with seven partner banks including Bank of America, Credit Suisse First Boston (CSFB), Société Générale, UBS Warburg, ABN Amro, Dresdner Kleinwort Benson and Lehman Brothers.The partner banks provide near real-time quotes for customers who access Fenics online via a monthly subscription. End users can price and analyse a full range of currency derivatives, including both vanilla and exotic options, across a range of currencies using the traditional Fenics pricing products and information provided by the alliance. In the first two weeks of launch, the service priced more than 90,000 options for more than 1,400 new users.
In May, Gooch told Profit & Loss that his plan for GFInet was to make it a Web-based financial portal, open to online exchanges and auctions for both market makers and end users, such as corporates and fund managers. “It has always been Fenics’ plan to get into online execution, and it has been ours to get into analytics, so this acquisition immediately launches us into this arena,” says Gooch.
GFInet intends to combine Fenics’ analytics with an online FX options trading platform, which is due for launch early in the new year, offering traders one-stop pricing, execution and trade reporting. GFInet also plans to extend and link Fenics to all existing and future GFInet markets such as electricity and credit derivatives. So upon completion of the acquisition, GFInet will offer electronic and voice brokerage services, real time data and analytics, as well as technology services to the online OTC cash and derivative markets, creating an integrated trade execution service across markets.
“Currency derivatives are not the end story here. This acquisition allows us to quickly drop markets such as credit and energy onto the platform, thereby solidifying our position as the number one provider of data, pricing, analysis, news and execution for the derivatives markets globally,” says Gooch.
Gooch, who says he was Fenics’ first customer when it launched in 1986, will remain chairman and CEO of GFInet, while Steve McMillan will remain as COO. Fenics’ CEO John Ashworth will become chief commercial officer.
“Our hybrid brokerage operations are doing extremely well with our recently launched electricity and repo platforms exceeding our best case scenarios,” says McMillan. “By integrating analytics with online trading, we are starting straight-through processing where it should be started, at the very inception of the trade. This will improve efficiency for our customers and drive even more liquidity into our online trading platforms.”
“We are looking forward to combining Fenics analytics with GFInet online brokerage services and are very excited about the value this creates for our customers and alliance partners,” says Ashworth. “Fenics will extend its offering into new asset classes very quickly with Fenics 2001, scheduled for release in February, for up-to-date clients.”
Between October 1999 and February 2000, Fenics rolled out Fenics 2000, a Web-based upgrade to its core platform for pricing and managing FX options.
After the acquisition, GFInet and GFI Group will have more than 400 staff combined with headquarters in New York and offices in London, Tokyo, Hong Kong, Singapore, Sydney and Tel Aviv. GFI was named the number one credit derivative brokerage by Risk magazine for the past three years.
GFInet targets the same interbank market as competitors such as the bank-owned Volbroker (which launched in August 2000), but move beyond that as a supplier of technology, says Gooch. Strengthened by the acquisition of Fenics, GFInet sees potential to link its wholesale liquidity to end-user systems to FX platforms such as FXall and Atriax.
Gooch says GFInet will take advantage of the fact that it will have users of the analytics and dealers/market makers on the same platform. “We intend to streamline costs for market makers by supplying them with technology, liquidity and expertise. This will greatly increase the efficiencies of the sales desks because revaluation, analysis, price discovery and execution will be provided live over the Internet,” he says.