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Foreign Exchange

Gain Capital looks for synergies as it buys US trading platform

Gain Capital, the owner of one of the world’s leading retail FX providers, believes its purchase of online futures broker Open E Cry (OEC) from optionsXpress, a subsidiary of Charles Schwab, will help it meet increasing demand for exchange-traded products.

OEC offers its client base of mainly US high-volume traders access to the futures market through its OEC Trader platform. Clients can also trade options, equities and forex through the platform. OEC holds $98.3 million in customer assets and has about 7,800 open accounts. In 2011, it had revenues of $13.6 million.

“This is part of our strategy to diversify our revenue stream,” Glenn Stevens, chief executive at Gain, tells EuromoneyFXNews.

He says there are two main factors that made the acquisition attractive.

First, he says, it is an investment in the US. “We started out as a US company, but have expanded globally over the past several years. However, the US market still has a lot of value and this acquisition allows us to expand the products we offer to our US clients.”

Second, Stevens says there is a lot of interest outside the US in exchange-traded products, particularly in Asia and eastern Europe.

“One of the good things about OEC is that they are connected not just to US exchanges, but to global exchanges.”

Stevens believes there will be synergies from cross-selling the access OEC has to these global exchanges to Gain’s existing forex customers, while also selling the group’s forex offering to OEC’s mainly US-based clients.

He says, inside Charles Schwab, OEC was essentially a US business trading US futures with US customers.

“But given their proprietary technology and given their existing plumbing into all these global exchanges, we are able to take their platform and their infrastructure, and superimpose it on our global brand, and now you have a different profile of what OEC can be.”

Gain, which expects to close the deal to buy OEC in the third quarter, will give more details on how much it will pay for the acquisition in July, but says it is an all-cash transaction.

It is, however, a buyer’s market in the sector, and Stevens reveals that Gain will pay a price “commensurate” with OEC being a standalone company, and which does not reflect the potential synergistic benefits to Gain.

“The good news is OEC is profitable as it stands,” says Stevens. “The company will add to our profitability on day one.”

Gain operates Forex.com, one of the largest retail FX providers. It also owns Gain GTX, an FX electronic communication network for institutional clients, and Gain Securities, a licensed US broker dealer.

OEC was founded in 2002 and acquired by optionsXpress in 2008. Last year, optionsXpress was bought out by Charles Schwab, the largest online retail stock-and-options brokerage in the US.

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