Who is Courting Chi-X Europe?
Earlier today, the operators of multilateral trading facility (MTF) Chi-X Europe announced they had received a purchase offer for either the whole of Chi-X or a portion of it, and that the board is reviewing the offer. No other details, including the identity of the potential buyer, have been made public.
It's surprising that no other offers have been made prior to this. Ever since the London Stock Exchange (LSE) acquired competitor Turquoise MTF, all the independent MTFs were ripe for acquisition. They've introduced disruptive trading technology and order types, which have left most of the exchanges to play catch-up with their offerings.
A number of businesses would make logical suitors for Chi-X. The first that comes to mind would be Deutsche Börse. It's one of the few global exchanges that don't have a presence in London. As the European Commission continues to draft the next iteration of the Markets in Financial Instruments Directive (MiFID) the idea of a consolidated European tape is turning more and more into a reality. If Deutsche Börse remains in its Frankfurt facility while its competitors have set up shop in and around London, that distance will add latency to quotes that Deutsche Börse contributes to the consolidated tape and make them less attractive.
Spanish exchange operator Bolsas y Mercados Españoles also has the same issue, but hasn't shown the same acquisition behavior that Deutsche Börse has demonstrated in the past.
The LSE, NYSE Euronext and Nasdaq OMX each have their own MTFs and it's doubtful they would be doing anything but purchasing liquidity if one of them acquires Chi-X.
Looking at non-exchange players, Chi-X Global could be looking to bring the MTF back into the fold. Unlike the rest of its trading venues, Chi-X needed to syndicate partial ownership in the new MTF to gain liquidity and interest from the banking community. It could be time to buy out its partners.
What are your thoughts on the matter? Please let us know.
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