Acquisitions can sometimes turn out to be a flop. But when they do not, they can prove to be real gems and enhance a company’s top and bottom lines. Take, for instance, BidFX, a cloud-based foreign exchange (forex) trading platform provider, which became a fully owned subsidiary of the Singapore Exchange (SGX) last year.
For 1HFY2021 ended Dec 31, 2020, SGX says its fixed income, currencies and commodities business (FICC) recorded revenue of $99.2 million. This was an increase of $14.5 million or 17% from $84.8 million a year ago. The bourse operator says FICC revenue would have decreased 3% y-o-y to $82.5 million if not for BidFX’s contribution.
According to Jean-Philippe Malé, CEO of BidFX, the forex trading platform saw a spike in volume last year amid the Covid-19 pandemic. This came despite the potential work disruption that could occur owing to the lockdown measures implemented across many countries. Forex traders, bankers and hedge fund managers, who are usually bound to their office desks, were forced to work from home.
Fortunately, BidFX’s cloud-based technology allowed for a seamless transition to working from home. This was in addition to the generous provision of hardware by some companies and the allowed usage of personal hardware for work purposes. “You know, we’ve been quite lucky because we were born in the cloud already. We don’t offer software; we offer a service,” he tells The Edge Singapore in a recent interview.
The mobile version of BidFX’s trading platform also helped. The app saw an uptick in customer usage, according to Chan Wai Kin, head of Asia Pacific at BidFX. Although many forex traders prefer the desktop setup, which allows multiple wide screens, the app allows them to monitor or execute trades on the go, he says. “Without it, you’re sometimes caught in between situations where you’re not inside the home or office,” he explains in the same interview.
Overall, SGX reported a strong set of results for 1HFY2021. The bourse operator’s earnings grew 12.4% y-o-y to $239.8 million from $213.3 million. Its revenue jumped 8.8% y-o-y to $520.8 million from $478.5 million. “We had a solid first-half performance with growth across all three business segments, amid an uncertain global environment,” Loh Boon Chye, CEO of SGX, said in a Jan 22 statement.
From TradingScreen to SGX
BidFX was initially part of TradingScreen, a US-based multi-asset electronic trading solution provider. The latter provides softwareas-a-service based trading services for hedge funds, asset managers and brokers. BidFX was built as part of the custom execution management solutions delivered to the forex community.
As BidFX continued to grow, it was spun off from TradingScreen into its own entity in 2017. BidFX became a subsidiary and remained part of the latter’s multi-asset solution.
BidFX’s success caught the attention of SGX, which had been working with BidFX to provide solutions for the bourse operator’s bond platform. And so, in early 2019, it acquired a 20% stake in BidFX for US$25 million in cash. BidFX subsequently became an associate company of SGX. Loh took a seat on BidFX’s board of directors.
As part of SGX’s push to strengthen its multi-asset exchange strategy, Loh had then said the acquisition will allow the bourse operator to offer its Asian FX futures products alongside the OTC FX products on BidFX’s platform. He added that the acquisition will enable the bourse operator to offer a broader proposition to its financial market participants. “This is a strategic investment as part of our strategy to grow the core pillars across the various asset classes,” he told a media briefing then.
The acquisition came with an option for additional shares, which would allow SGX to gain a controlling stake in BidFX. Loh also added that the bourse operator may exercise the option beyond the “next two to three years”.
As it turned out, BidFX’s continued growth and success, nevertheless, had enticed SGX to act earlier rather than later. In June 2020, the bourse operator acquired the remaining 80% interest in the company for a total cash consideration of US$128 million ($178.3 million). The deal was completed in July that year.
Malé, who was part of the negotiations for the acquisition of BidFX, says he welcomed the deal. He notes that SGX’s takeover was driven by the company’s focus on growth in Asia and a strong track record of servicing clients in the region, despite its headquarters in London.
More importantly, SGX’s ambition to become a major forex player in Asia is closely aligned with BidFX’s, says Malé. The bourse operator, he notes, has over the years developed strong forex futures offerings. “So, I think the combination of these two factors, help us decide to favour SGX more as a strategic investor and a full acquisition in December 2020,” he says.
Asia focused
BidFX aims to continue pursuing growth in Asia, says Malé. The company already has “local boots on the ground” with offices here, Hong Kong, Tokyo and Sydney, he notes. But he adds that BidFX has plans to expand into more cities across Southeast Asia and North Asia. “So, clearly for us, the plan is to continue to service our key customer segments well, which are the hedge funds, expanding into events, the corporates and the asset management community,” he says.
According to Chan, BidFX is recruiting more staff. The company’s Tokyo office has hired a local representative who will run the Japan business. In Sydney, BidFX has taken up more office space to house more client servicing and infrastructure-based personnel, he adds.
That aside, the company on March 9 announced the launch of the BidFX Data and Analytics. This new offering enables banks, hedge funds and asset managers to manage the collection and cloud storage of client-specific liquidity streams. It also allows them to monitor composite rates across multiple FX products. This gives institutional players a comprehensive view of the pricing, market impact and liquidity for every transaction.
Asked if BidFX has plans to venture into solutions for cryptocurrencies, Malé says the company has yet to receive substantial demand from clients. Still, he notes that BidFX’s platform is ready to support cryptocurrencies should there be a need.
“I think there could be a change in the future and some of our clients may require us to deepen the functional capability of the platform to better serve the crypto community. For the moment it has not been the case. But we are very much listening to our clients’ feedback when it comes to when they decide to trade crypto. It could go either way. There is a lot of debate out there on whether it is just going to go through the roof or just collapse down. I have no strong opinion [now],” says Malé.
In any case, Chan points out that SGX has partnered DBS Group Holdings by taking up a 10% stake in a digital exchange set up by the bank. The digital exchange, known as DBS Digital Exchange, will enable institutional investors and accredited investors to trade tokenised assets, such as cryptocurrencies.
