Nasdaq Suspends Currency-Trading Plans While Rivals Race Aheadby
Exchange operator says lack of demand led it to halt plans
Nasdaq said to have been among bidders for Hotspot FX and 360T
Nasdaq Inc. has put its foreign-exchange ambitions on hold because of a lack of demand from customers, even as its rivals spent about $1.2 billion last year on platforms to trade the world’s biggest asset class.
“We’re not currently looking at any FX platforms and we’re putting the FX initiative on hold,” said Magnus Billing, senior vice-president and head of Nordic fixed-income and Baltic markets. “We came to the point that we don’t feel customer demand is sufficient for us to launch any market in the foreseeable future.”
Nasdaq was among the final bidders for 360T or Hotspot FX, currency trading venues bought by Deutsche Boerse AG and Bats Global Markets Inc. last year, according to people familiar with those deals. The company’s efforts to enter currency markets have focused on derivatives.
Exchange companies are eyeing the bank-dominated foreign-exchange market, following a series of fines stemming from allegations of market rigging. Currency traders are also attracting greater scrutiny because of a practice known as “last look,” which gives them the right to back out of trades.
The market was roiled a year ago when the Swiss National Bank jettisoned its price cap on the franc. Some banks sought to reduce their losses by trying to renege on transactions.
“Some participants in the FX market feel that it is moving toward more transparent trading, perhaps to more exchange look-alike trading,” Billing said. “There are a number of exchanges or marketplaces seeing those trends, and that obviously is attracting interest.”
Nasdaq’s decision to suspend its currency-trading initiative was earlier reported by Profit & Loss, a trade magazine.
Nasdaq’s revenue from currency trading and clearing was minor. Sales from fixed income, currencies and commodities trading and clearing fell to $23 million in the third quarter from $30 million a year earlier, the exchange operator said in an earnings presentation.
David Holcombe, who was head of Nasdaq’s foreign-exchange initiative, has left the company. Phil Harris, previously Nasdaq’s head of FX initiatives and strategy, joined ICAP Plc last year.