Breaking news: Teddy Sagi moves into the clearing and institutional FX business as Playtech about to buy CFH Group

FinanceFeeds Exclusive: Institutional technology provider and prime brokerage CFH Group is in the final stages of concluding an acquisition deal with gaming software provider Playtech, in which Playtech is expected to acquire a majority stake in CFH Group. The deal has not yet been sealed and is expected to be fully completed within the next few hours

London, Canary Wharf from Thames

According to research conducted by FinanceFeeds involving many sources close to the matter, liquidity provider and prime brokerage CFH Group is in the final stages of the sale of its operations today to British publicly listed company Playtech, part of London-based Israeli billionaire Teddy Sagi’s massive online trading and gaming software empire.

Back in August, FinanceFeeds became aware from industry sources in the institutional sector that the Financial Conduct Authority in Britain was about to give approval for a British company to take a majority shareholding in CFH Group, with the process having been ongoing for several months.

In February this year, speculation began to surface within Britain’s institutional FX and technology sector that CFH Group would consider an investment from a firm that would take a majority shareholding, and now this has come to fruition.

FinanceFeeds is aware that as the night progresses, senior executives and board members of both CFH Group and its acquirer have been working through the small hours in order to conclude the terms of the proposed transaction, which at the time of going to press has not yet been concluded, however this is very big news indeed and the two firms are expected to conclude the final aspects of the acquisition during the very early hours of this morning.

Many sources privy to detailed information on the matter have confirmed to FinanceFeeds that CFH Group is being sold to gaming software company Playtech, an Isle of Man-based entity founded in 1999 which is listed on the London Stock Exchange under the ticker symbol LON:PTECH.

Currently, the terms of the deal have not yet been made public, however as Playtech is a publicly listed company and therefore the terms will be reported very soon via the London Stock Exchange website. During the course of the weekend and overnight, FinanceFeeds has approached those involved for comment, however no figures or deal terms were divulged at this stage, thus the full figures will likely only be attainable via the imminent publicly available announcement. No parties involved have confirmed that the acquiring party is Playtech however we have it on very good authority that this is the case.

During the early part of this year, there had been consistent dialog within the institutional sector speculating that a potential sale by CFH Group of part of its operations. FinanceFeeds can categorically state that at that time, these were merely speculatory and CFH Group had continued its direction of looking to strengthen its position further by engaging in acquisitions.

In February, FinanceFeeds spoke to CFH Group’s astute and urbane CEO Christian Frahm about this matter, who explained at the time “We came out after the Swiss National Bank’s removal of the 1.20 peg on the EURCHF pair, and said at the time that this sector will consolidate. We brought onboard Singapore-based CEO of Citi Venture Capital Investment Dipak Rastogi who is one of the top people in the world on the mergers and acquisitions side, with a 33 year tenure at Citigroup.”

“This is what we are now executing, the acquisition of smaller players to put them under our umbrella” – Christian Frahm, Founder & CEO, CFH Group.

In August this year, CFH Group waved goodbye to charismatic and knowledgeable prime brokerage expert Nick Mortimer, who left his position at CFH Group and headed into the retail FX industry by joining MahiFX as Head of Retail Sales.

Mr. Mortimer is a regular commentator on all aspects with regard to prime brokerage and the currently very hot topic of how prime of prime solutions providers and liquidity aggregators interact with banks that are increasingly unwilling to give credit to OTC derivatives firms.

A forthright and well respected figure with very clear opinions, Mr. Mortimer became a very well recognized industry figure during his five years at CFH Group.

Whilst the imminent acquisition of CFH Group by a gaming software company may appear at odds, it is actually a very good marriage should it proceed. CFH Group has a comprehensive understanding of that particular business, having shown interests in moving in that direction before, exemplified by its acquisition of a 50 per cent stake in Tradimo Interactive, the online school and community for online financial trading set up by the founders of PokerStrategy.com.

Tradimo, which had been run by PokerStrategy.com’s former parent company Etruvian Group, operates an online trading school and the newly-launched educational gaming company Tradimo Play.

Tradimo was Etruvian’s second standalone product, after PokerStrategy.com, and launched in November 2012 following 18 months of development.

One particular moot point for CFH Group is the diversification that the company embarked on, a particular example being moribund application based platform Tradable which is owned by and was invested in by CFH Group.

It has been nigh on impossible for many new firms with API-based platforms to gain any traction over the traditional MetaTrader 4 platform which was initially designed to operate in a closed ‘warehouse’ environment and not to connect to external liquidity feeds from prime brokerages, and has had to be adapted by specialist liquidity management technology and bridge providers in order to operate in today’s retail trading environment.

That in itself was a very significant indicator that MetaTrader 4’s dominance would be set in concrete. When the retail trading firms that do not develop their own platforms switched en masse away from the warehouse model at the beginning of this decade and the entire trading topography began to emulate the institutional world, instead of eschewing MetaTrader and opting for all new, a-book orientated FIX API-connected platforms with novel applications and an opensource developers area for the purpose of designing new trading tools, the vast majority of brokerages remained steadfast in their loyalty to MetaTrader 4 and a whole host of specialist developers began adapting its interface in order to connect it to live liquidity streams.

Tradable, led by the astute, slick and dynamic Jannick Malling is a particular case in point. The platform appeared on the scene just over four years ago, a bastion of leading edge modernity, oozing ‘new generation’ right the way from the composed classiness of Mr Malling himself right the way through to the execution of the platform’s design. The world’s very first application-based platform, within which users could develop their very own trading applications, and the ability to avoid needing any liquidity bridge, as it connected directly into a broker’s infrastructure and a liquidity provider’s price feed via API, revolutionary in the retail trading platform business at the time.

Interestingly, where Japan cost Tradable a fortune, it has been a key region of interest for CFH Group, the company having recently established a partnership with efx.com Securities Co in Tokyo which is a highly prestigious Japanese brokerage, to roll out NetDania’s NetStation trading platform and ClearWeb, certainly putting paid to any speculation that the firm was not in growth or acquisition mode this year.

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