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Foreign Exchange

FXCM takes 50% stake in high-frequency market maker Lucid Markets

FXCM, one of the world’s largest retail foreign exchange brokers, has agreed to take a 50% stake in Lucid Markets, an algorithmic FX trading firm, for approximately $176 million as it seeks to grow its institutional client base in the FX markets.

“The acquisition of Lucid – a leader in market making and trading in the institutional FX market – is a natural extension of the evolution of our institutional business,” says Drew Niv, chief executive officer of FXCM, in a press release issued by the firm. Lucid has “demonstrated the ability to grow and deliver solid results across a range of market conditions”, he states. “This transaction also adds the expertise and talents of one of the best firms in the FX world. We are most excited about the potential a Lucid/FXCM combination gives in serving our institutional clientele.”

The acquisition reflects the growing push by retail foreign exchange brokers to extend beyond the retail market into the institutional investor market place, by offering low-latency market making capabilities that have traditionally been the domain of the leading FX banks.

High-frequency trading firms, such as Lucid, now offer their liquidity stream to a select range of FX clients, such as retail brokers, as an alternative form of liquidity to the banks.

Lucid was founded by Dierk Reuter, the former head of FX algorithmic trading at Deutsche Bank, in April 2009, as a specialist high-frequency trading firm, and has built out a market-making business to institutional clients since then.

In the 12 months ending December 31 – under UK generally accepted accounting practice – Lucid had revenues of $148.9 million and earnings before interest, taxes, depreciation and amortization of $113.4 million. Lucid traded $13.4 trillion of foreign exchange in 2011, the FXCM statement says.

Consideration payable for the acquisition consists of six-month notes of $71.4 million plus Lucid cash acquired, bearing interest at 3.5% per annum, and nine million FXCM Class A common shares, of which approximately two million shares will be delivered at closing and the remainder subject to certain restrictions.

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