Carsten Kengeter’s 7RIDGE acquires AFX to address demand for credit-sensitive rates

Rick Steves

“There is an ever-increasing demand for credit-sensitive rates, especially in the current macroeconomic environment. We look forward to working with the AFX team and members to make this exciting vision a reality.”

7RIDGE, the specialized growth equity firm led by Carsten Kengeter, has acquired 100% of the American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions.

The deal will enable AFX to accelerate its growth trajectory and expand its network of members borrowing and lending on its platform as well as further adoption of its unique credit-sensitive AMERIBOR benchmark.

“There is an ever-increasing demand for credit-sensitive rates”

Carsten Kengeter, Founder of 7RIDGE, said: “We see a great opportunity to deliver on the full potential of the infrastructure that AFX has built and the groundwork it has laid over the years. There is an ever-increasing demand for credit-sensitive rates, especially in the current macroeconomic environment. We look forward to working with the AFX team and members to make this exciting vision a reality.”

Dr. Richard L. Sandor, Founder and Chairman Emeritus of AFX, said: “7RIDGE and its team have a proven track record of leadership and success in financial markets worldwide. This transaction positions AFX with the resources and commitment to take the exchange and AMERIBOR to the next level and to expand on the important work of our members in building a transparent and transaction-based benchmark and further build shareholder value.”

Launched in 2015, the American Financial Exchange (AFX) is a self-regulated exchange with over 240 bank and non-bank members across the United States which offers a suite of products for the interbank loans marketplace.

AFX also facilitates the determination of the American Interbank Offered Rate (AMERIBOR), an interest rate benchmark that reflects the actual unsecured borrowing costs of more than 1,000 American banks and financial institutions, that together represent 25% of the U.S. banking sector’s total assets. AMERIBOR is utilized to set floating rates in loans, for hedging interest rate risk, and in financial futures as it closely tracks banks’ actual cost of funding on a daily basis.

7Ridge’s Trading Technologies enters fixed income space

With new ownership, new leadership, and a new macro environment, the stars have aligned for TT, a re-energized company that has been making a series of acquisitions, most recently taking over AxeTrading, a London-based provider of fixed income trading solutions.

AxeTrading provides market participants including banks, broker-dealers and buy-side firms with connectivity to more than 50 fixed income trading venues across corporate bonds, government bonds, munis and interest rate swaps. The fixed income market is rapidly moving away from a voice intermediated market to the adoption of electronic trading. AxeTrading has been at the forefront of this evolution for more than 10 years, meeting the challenges of market participants who need tools to automate the pricing, trading and regulatory reporting of often illiquid securities, across multiple trading venues, in a market that is still largely driven by requests for quote (RFQs) rather than a central limit order book (CLOB).

“A significant moment”, Keith Todd told FinanceFeeds Editor-in-Chief Nikolai Isayev at FIA Boca 2023 last month. “Next year is our 30th anniversary, but this is the first time TT moves materially to a new asset class: fixed income – corporate bonds, municipal bonds, Treasuries (we’re already in the Treasury market)”. Bringing about 30 customers largely from Europe and APAC to TT, Keith Todd praised AxeTrading’s foothold and product features and functionality, and highlighted that the priority for TT was to enter the fixed income markets.

The world of fixed income is quote driven, relying on RFQs, which need a different type of sophisticated software, particularly to help price illiquid corporate bonds, and AxeTrading brings that to the TT platform, Keith Todd said.

Speaking of RFQ and fixed income, Keith Todd also mentioned the recently announced partnership with Deutsche Börse’s derivatives-focused exchange, Eurex, to facilitate access to Eurex EnLight, the selective RFQ platform. The integrated solution is expected to be made available on the TT platform by the end of 2023 for all equity, equity index and fixed income options and corresponding futures traded on Eurex as well as for all FX derivatives.

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