New York and London - Bats Global Markets has announced plans to acquire Javelin SEF, a Swap Execution Facility.
The deal is intended to accelerate Bats' plans to offer trading of non-deliverable forwards (NDFs) for the foreign exchange market. Javelin currently offers trade execution for swaps through a combination of an anonymous Limit Order Book and a Request for Quote model.
Dodd Frank provisions mandate that certain market participants trade NDFs on SEFs. The market is regulated by the Commodities Futures Trading Commission (CFTC).
NDFs are currency contracts that enable investors to hedge against exposure to restricted foreign currencies, like the Brazilian real, Chinese renminbi, and Indian rupee, against freely traded currencies, like the U.S. dollar. At settlement, differences between the NDF price and prevailing spot price are paid out in the freely traded currency.
The transaction is pending regulatory approval, at which point Javelin will be integrated into Bats Hotspot. Deal terms will not be disclosed.