--Thomson Reuters set to buy FXall as trading platforms fight it out for volume --Move surprises industry insiders --Merger likely to boost pressure on competition, but difficulties may lie for integration Thomson Reuters Corp. (TRI) Monday said it has agreed to buy electronic currencies trading platform FX Alliance Inc. (FX) for $616 million, cranking up competition in the electronic currencies dealing space and suggesting the data-provider is striving to get a bigger slice of the $4 trillion global currencies business. Thomson Reuters, which also produces news that competes with News Corp.'s Dow Jones & Co., publisher of The Wall Street Journal and Dow Jones Newswires, has traditionally focused on bank-to-bank currency-trading systems while FXall's systems served companies and investors. Those two areas have never been combined in this way before. The two platforms are now set to merge in a move that looks to be in direct contrast to the wider industry trend of serving specific customer groups on different trading venues. But melding the systems together, and potentially pooling all users--banks and clients--onto a common platform, will be tough. A spokesperson for FXall said the two platforms will now merge, but declined to give further details until the deal completes in the coming months. The combined might of the two companies -- an average $154 billion of trades a day flowed through Thomson Reuters in May and an average $98.6 billion went through FXall in June -- would make the new venue easily the biggest electronic trading pool in foreign exchange. "Thomson Reuters...will support FXall and its own FX platforms," said a Thomson Reuters spokesperson. "The details of the combined organization will be reviewed as part of the integration planning activities and any announcements will be made after the close of the transaction." The merger of the two systems took industry insiders by surprise. "I'm totally blindsided. I would not have put to the two together," said David Poole, a principal at consultancy ClientKnowledge in London. The head of operations at a separate currency-trading platform, who did not wish to be named, described the tie-up as "big news" that will compete keenly with ICAP PLC (IAP.LN)-owned EBS, which has up to now held a duopoly in bank-to-bank trading with Reuters. EBS declined to comment. Knitting together bank- and customer-focused systems is likely to prove tricky, as EBS found out when it allowed non-bank clients to trade on the system more than five years ago, leading to dissatisfaction amongst its traditional bank market-makers. After lagging Thomson Reuters' volumes for more than six months, EBS is now set to announce changes to its rules that would level out the playing field for bank client by reducing the trading advantages to traders who benefit from superior technology and faster trading speed. "What remains to be seen is whether this [merger] will trigger a wave of further acquisitions and concentration, or whether it will spook the broker-dealers who could view the potential opening of the protected inter-dealer platforms with suspicion," said Frederic Ponzo, managing partner at Greyspark, a capital markets consultancy. Write to Eva Szalay at eva.szalay@dowjones.com
