Squeezed FX brokers face choice: merge or spend big on tech
* Boom in M&A for mostly London-based specialist brokers
* Brokers made millions undercutting banks on corporate FX
* But squeeze coming from spread of multi-dealer platforms
By Patrick Graham
LONDON, Dec 12 (Reuters) - Next year may prove a watershed for a generation of London forex entrepreneurs who have made millions undercutting banks' margins on day-to-day business currency needs but look exposed to the change they have provoked.
Mergers since 2009 have seen firms including Western Union and Euronet pay up to $1 billion for some of the specialist brokers servicing thousands of companies too small to register on the radar of banks' currency trading arms.
The consolidation, however, also reflects the pressure brought to bear on these businesses by the costs of regulatory checks on currency movements and the rise of automated trading platforms.
Managers in the sector say they are left with two choices: jump on the hi-tech bandwagon and accept the tiny margins it provides, or aim for a more sophisticated service that works closely with companies to look after their foreign exchange at more advantageous rates.
"There's definitely further consolidation to come," says Stuart Holmes, European boss of AFEX, one of the biggest players in a segment that has already been whittled down from almost 400 companies in 2009 to just under 100. Continuación...