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Sideways: Banks make terrible online brokers

If Michael Spencer manages to sell NEX at a price that places a high value on its core FX and electronic bond dealing platform, he will have pulled off an impressive slow-motion brokerage trade.


Michael Spencer, group CEO of NEX

The NEX Markets unit that includes FX platform EBS and its bond counterpart BrokerTec may sell at a relatively high multiple of revenues, especially if Spencer can generate a bidding war between competing exchange groups.

The sale of BrokerTec’s competitor eSpeed in 2013 for around 7.5 times annual revenue and the disposal of FX platform 360T in 2015 at a revenue multiple of almost 13 must give Spencer hope that he can get a good price for his own electronic brokerage.

The bank consortiums that once owned BrokerTec and EBS may look at a coming disposal more ruefully.

BrokerTec was sold to Icap, the predecessor firm to NEX, at a multiple of not much more than twice revenue in 2002, and EBS moved from a separate group of bank owners to Icap in 2006 at less than four times revenue.

These sales took place over a decade ago, of course, and Spencer ensured the platforms remained leaders in electronic broking. The record of banks in monetizing the secondary value of their own dealing activity and data generation through the years remains poor, nonetheless.

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