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May 9, 2008

NYFIX Expands IOI Reach with Acquisition

By Nina Mehta

Also in this article

  • NYFIX Expands IOI Reach with Acquisition

Almost two years after rolling out its first indications-of-interest (IOI) product, NYFIX is upgrading its offering to cater to the changing needs of big traders. As part of this effort, NYFIX last month purchased FIXCITY, a U.K.-based technology firm, for $6.6 million in an all-cash deal.

"This will accelerate our liquidity-seeking and liquidity-aggregation capabilities and hence our ability to execute orders for clients," chief executive Howard Edelstein told Traders Magazine.

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FIXCITY, founded in 2002, has an IOI product, called ioinet, used by 120 firms, including 70 buyside institutions with trading operations in Europe. Its desktop application also has separate products designed to help buyside and sellside firms, respectively, filter the IOIs they receive and send tailored indications to clients.

But aggregating liquidity may not be the only gleam in NYFIX's eye. NYFIX "is going after AutEx," said William Gibson, an analyst at Nollenberger Capital Partners, an investment bank based in San Francisco. Although the broker has already put a lot of effort into its existing IOI product, Gibson noted, the FIXCITY acquisition gives NYFIX "analytical capabilities as well as a front end designed by guys who've worked with traders for five or six years." He said NYFIX needs both the functionality and the front end, neither of which it previously had, to compete with Tradeweb's AutEx, the long-standing IOI kingpin.

Buying FIXCITY, according to Gibson, is also a sign that NYFIX is determined to expand its buyside customer business. NYFIX "has the infrastructure, the FIX connections, and now wants to get on as many desks as possible to earn more transaction business," said Gibson, who owns NYFIX stock. The FIXCITY desktop application, which lets buyside firms track and filter brokers' IOIs based on their needs in real time, makes that possible.

NYFIX paid 3.3 million pounds (approximately $6.6 million) to acquire FIXCITY from its founders in early April, according to an 8-K filing. Edelstein told Traders Magazine that the acquisition, while small in dollar terms, was expected to be accretive "in the not-too-distant future." The broker also agreed to pay the founders an additional $1 million if the FIXCITY and NYFIX technology platforms are successfully integrated by early October.

Ioinet, the FIXCITY IOI product, will sit on top of the NYFIX Marketplace network. That community of market participants and the ioinet community will be consolidated later this year, Edelstein said.

NYFIX, whose stock began trading on Nasdaq again in February, after being delisted in 2005 for accounting problems, saw revenues from the firm's transaction-services business grow 74 percent last year, Edelstein told analysts in February. Matched volume in Millennium, the broker-dealer's U.S. dark pool, hit a record daily average of nearly 58 million shares matched in January. Average daily volume in Millennium for the first quarter of this year was 49.4 million shares, according to Nollenberger's Gibson.