Deutsche Börse buys stake in FX options platform Digital Vega
Deutsche Börse, the world’s third-largest derivatives exchange by turnover, has agreed to acquire a minority stake in a UK-based currency options start-up platform, Digital Vega.
DV’s platform will match FX option buy-side customers with market-makers via a request-for-quote system – a system more suitable for less-liquid instruments than the exchange-trading or click-to-trade mediums. Seven major option market-makers will provide liquidity to the platform when it goes live later this month, with a further five banks to begin offering prices in the near future.
Source: Digital Vega
Option structures currently provided on the platform include prices on single-option puts and calls, straddles, strangles and risk reversals, with or without hedges. DV hopes to add calendar spreads, vertical spreads, barriers and limit orders in the coming months, says Digital Vega CEO Mark Suter.
The platform was built in partnership with worldflow, a specialist e-commerce platform consultant, and has been two years in development. The two parties consulted with liquidity providers and buy-side participants to design a platform that, while resembling cash market execution venues, was able to connect to a variety of pricing systems that exist in the options market.
The trading platform is browser-based, requires no download and is compatible with Internet Explorer, Safari, iPads and iPhones.
This move marks its first involvement in FX derivatives for the German bourse, operator of the Frankfurt Stock Exchange and Eurex. Terms of the deal have not been disclosed, but Deutsche Börse confirms it will pay less than $10 million for the stake.
Suter says: "We are immensely pleased to announce this investment from such strategically important partners and view this as a clear endorsement of our vision and business model. By leveraging our collective strengths, and working with our buy- and sell-side supporters, we intend to establish Digital Vega as one of the most significant participants in the changing FX environment."
Suter has more than 30-years experience in the FX industry, having worked for Chase Manhattan, RBS, Paribas and Standard Bank in a range of trading, sales and senior management roles. He also spent two years in product development with multi-dealer platform FXall.
The acquisition is the second bolt-on purchase for Deutsche Börse in pre-trade OTC technology in the past 12 months, as exchange and OTC markets converge as a result of regulatory reform. In November, it acquired a minority stake in the OTC derivatives-focused request-for-quote platform RFQ-hub. The Anglo-French firm began life in listed equity derivatives, branching out into commodities and swaps.
"This investment in Digital Vega highlights our recognition of the changing industry landscape and aims to support the G20’s commitments to improve the integrity and safety of the over-the-counter markets," Peter Reitz, managing director of Deutsche Börse, adds.
"As a regulated exchange and clearing house, we provide transparent trading, processing and clearing services. The software and processes provided by Digital Vega are an important element to achieve the regulator’s goal of higher transparency."
DV’s platform will also provide full trade confirmation, reporting, and straight-through processing.