Knight Capital Group is acquiring Hotspot FX, which operates an ECN-based platform for spot foreign exchange transactions, in an all-cash deal for approximately $77.5 million.
Based in Watchung, New Jersey, the privately held firm gives institutions and broker- dealers access to electronic spot foreign exchange trading through Hotspot FXi. The transaction is expected to close within 90 days subject to regulatory approvals.
"The addition of Hotspot advances Knight's ambition to become a virtual exchange for high-quality trade execution across multiple asset classes," stated Thomas Joyce, chairman and chief executive officer of Knight Capital Group, in a release. Nasdaq's market maker in equity securities, Knight said the acquisition would help diversify its revenue stream with a fee-based model.
Hotspot will operate as a separate subsidiary of Knight Capital Group. The acquisition is expected to be cash flow positive immediately following the closing of the transaction, adds the release.
Launched in 2000, Hotspot FXi is an e-financial marketplace where buyers and sellers worldwide can trade directly and anonymously with each other, obtain price improvement and lower their overall trading costs, the release says. It now supports 24 currency pairs and executes 5,000 to 10,000 FX spot trades per day.
Hotspot clients include asset managers, hedge funds, commodity trading advisors, corporate treasurers and regional banks. They benefit from live streaming prices from participants and from a network of prime brokers providing credit intermediation and post-trade support.