Kansas City, MO-based Bats Global Markets, Inc. has announced plans to acquire Javelin SEF, LLC, a Swap Execution Facility. Bats Global Markets is a global operator of exchanges and services for financial markets. It is the second-largest stock exchange operator in the U.S., operates the largest stock exchange and trade reporting facility in Europe, and is the number one market globally for ETF trading. The company also operates two US. Options exchanges. In the global foreign exchange market, it operates Hotspot, and ETF.com, a leading provider of ETF news, data and analysis. In addition to its Kansas City headquarters, it has offices in New York, London, Chicago, San Francisco, Singapore and Quito, Ecuador.
The deal is intended to accelerate Bats’ plans to offer trading of non-deliverable forwards (NDFs) for the foreign exchange market. Javelin currently offers trade execution for swaps through a combination of an anonymous Limit Order Book and a Request for Quote model.
Dodd Frank provisions mandate that certain market participants trade NDFs on SEFs. The market is regulated by the Commodities Futures Trading Commission (CFTC).
“Our acquisition of Javelin underlines our commitment to the FX market and is an acceleration of our FX product rollout plans,” said Chris Concannon, CEO of Bats Global Markets. “The transaction will enable us to broaden the instruments available to trade on Bats Hotspot, adding to the platform’s existing product line-up.”
NDFs are currency contracts that enable investors to hedge against exposure to restricted foreign currencies, like the Brazilian real, Chinese renminbi, and Indian rupee, against freely traded currencies, like the U.S. dollar. At settlement, differences between the NDF price and prevailing spot price are paid out in the freely traded currency.
According to the latest Bank for International Settlements (BIS) triennial survey, total NDF daily turnover was $127bn as of 2014, and accounted for 19% of all forward currency trading globally.
The transaction is pending regulatory approval, at which point Javelin will be integrated into Bats Hotspot. Deal terms were not disclosed.