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.
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.
The FIXCITY acquisition also helps NYFIX ramp up in Europe. Snagging FIXCITY allowed NYFIX to immediately double the number of European customers that can subscribe to NYFIX services, including Euro Millennium, the firm’s London-based dark pool, which launched in March, Edelstein said.
The acquisition-related benefits aren’t limited to Europe. One of NYFIX’s goals is to create opportunities to integrate dark liquidity that’s resident within NYFIX Millennium with indications in the ioinet application. “Some of the liquidity that exists within Millennium [in the U.S.] could also be posted by clients into ioinet,” Edelstein said. “So clients using our IOIs will be able to see truly hittable orders-that’s part of our longer-term game plan.”
In the U.S., NYFIX currently enables customers using the Millennium Plus order type to send “liquidity alerts” to other dark pools or third parties. “Right now our IOI business is completely message-based,” Edelstein said. “But [with the FIXCITY acquisition] we can add an analytical display and information overlay.” The analytics from FIXCITY, he explained, will enable traders to see and access liquidity through NYFIX without knowing where that liquidity actually resides.
“This will boost our IOI business in the U.S., but it will definitely be a global platform,” Edelstein predicted. U.S. content will first be added to the current stream of European indications on ioinet, followed by Asian content. The IOIs will function both cross-border and domestically, Edelstein said.
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