Although analysts are positive on Singapore Exchange buying MaxxTrader, their recommendations are mixed for investors.
On one hand, Phillip Securities has downgraded the stock to a “neutral” rating from “accumulate” previously, albeit with a higher target price of $11.95 from $11.25.
“Stock positives… have been priced in, in our view,” Phillip’s senior research analyst Terence Chua writes in a note dated July 25.
On the other hand, CGS-CIMB Research has maintained its “add” call for the stock with an unchanged target price of $11.61.
“We think that this acquisition is complementary to SGX’s goal of expanding its FICC segment to account for about 25% of revenue in [three-to-four] years,” CGS-CIMB analyst Andrea Choong writes in a July 23 report.
On July 23, SGX announced that it will acquire MaxxTrader for US$125 million in cash ($169.9 million).
See also: SGX is buying sell side FX company MaxxTrader for US$125 mil
MaxxTrader is a provider of foreign exchange (FX) pricing and risk solutions for sell side institutions such as banks and broker-dealers, as well as a multi-dealer platform for hedge funds.
Phillip says the acquisition will further scale up SGX’s FX business as a “core pillar of growth”.
The acquisition will also broaden its client base to more than 200 institutional clients, including dealers, both on the buy and sell sides currently connected to its platform, adds the brokerage.
“It will help the bourse achieve scale and size,” says Chua.
CGS-CIMB notes that synergies are likely to be realised between MaxxTrader and SGX’s BidFX, which was fully acquired last year.
In particular, the price discovery and liquidity aggregation process of the over the counter (OTC) FX sell-side (BidFX clients) could be extended to the buy-side (MaxxTrader clients), it says.
At the same time, SGX is in the process of setting up a primary OTC FX electronic communication network by end-2021.
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The network will connect all institutional firms to trade OTC FX based on best available bid-ask quotes.
“Ultimately, having MaxxTrader on board will serve to accelerate SGX’s vision to build Asia’s largest one-stop venue for international FX participants,” says Choong.
As at 2.28 pm, SGX was up 5 cents or 0.4% at $11.85 with 1.5 million shares changed hands.
