Philip Weisberg has spent over 20 years in the foreign exchange (FX) market, having worked at firms such as JP Morgan (NYSE:JPM). But he saw that the process was antiquated. Traders used telephones and faxes to pull off their trades. So in 2000, Weisberg co-founded FXall to create an electronic FX platform.
It was great timing — the company has benefited from the FX boom. In fact, it plans to go public. Lead underwriters include BofA Merrill Lynch (NYSE:BAC) and Goldman Sachs (NYSE:GS). The company plans to issue 5.2 million shares at a range of $13.50 to $15.50 a share. The proposed ticker is “FX.”
With more than 1,000 clients, FXall is the leading independent global provider of electronic FX trading services. Functions include price discovery, trade execution and the automation of pre-trade/post-trade transactions. There are offices in all the major FX cities across the world.
FXall has seen explosive growth. From 2006 to 2010, average daily trading volume went from $37.5 billion to $62.3 billion. And yes, the company gets a piece of each trade. So for the year ended Sept. 30, revenues came to $114.2 million, and adjusted pretax earnings were a juicy $55.5 million.
Keep in mind that the FX market is the largest on the planet. The 2010 Triennial Central Bank Survey from the Bank for International Settlements tallied a daily volume of $4 trillion per day.
The market has been growing at a 20% clip for the past three years. Some of the drivers include: the trading activity of hedge funds and high frequency traders, global trade and the rise of cross-border investments. For example, over 40% of sales for the S&P 500 come from overseas sources.
Besides its strong technology, FXall also benefits from being an independent party. That is, the company does not have conflicts of interest by participating in trading. This makes it easier to snag top-tier clients.
The Dodd-Frank Wall Street Reform and Consumer Protection Act gives FXall another advantage. The bill essentially mandates centralized clearing of large amounts of FX trading through swap execution facilities (SEFs). FXall believes its platform will meet the requirements.
FXall should continue to grow. If anything, the company is in the early stages. After all, its platform accounts for a mere 2% of the global FX market in terms of daily trading volume.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “All About Short Selling” and “All About Commodities.” Follow him on Twitter at @ttaulli. As of this writing, he did not own a position in any of the aforementioned securities.