FX Alliance IPO Opens Up 13% After Cutting Price

Foreign exchange trading platform FX Alliance Inc. (FX) continued this week's winning streak in the U.S. IPO market, with its stock rising Thursday at the open.

Like three of the four companies that have debuted so far this week, FX Alliance had to cut its asking price before investors embraced its deal; all previous stock this week have also ended up with first-day gains.

The company's stock opened at $13.60 a share on the New York Stock Exchange, up 13.3% from its initial public offering price of $12. A total of 5.2 million shares were sold in the offering, which priced below its expected $13.50 to $15.50 range.

Based in New York City, FX Alliance provides electronic foreign exchange trading to institutions such as asset managers and banks, with more than 1,000 clients worldwide. More than half its trading volume comes from customers outside the U.S., and nearly three-quarters of its clients use its system to hedge commercial foreign exchange risk.

As of Sept. 30, its clients include 57 of the S&P Global 100, 130 of the Fortune 500, 52 of the top 100 European institutional asset managers, 27 of the top 100 U.S. institutional asset managers, six of the top ten hedge funds and all of the top 25 banks in the foreign exchange industry globally, according to its prospectus.

FX Alliance only provides the technology to helps its clients' trades; it doesn't act as a market maker or take principal positions for its own account, which lessens its risk profile.

In the first nine months of 2011, FX Alliance's average daily trading volume totaled $83.9 billion, representing approximately 2% of the global foreign exchange average daily trading volume during that period. In July, the company experienced record trading volume of $140 billion in a single day resulting from increased trading across all its trading systems

Preliminary results show the company expects revenues for 2011 to be between $117.5 million and $118.5 million, an increase of 19% at the midpoint of the range compared to 2010 due to an increase in transaction fees as a results of increased trading volumes.

But the company experienced a decrease in total average daily trading volumes of approximately 7% in the fourth quarter of 2011 compared to the prior quarter due to the euro-zone crisis, which has created uncertainty in the foreign exchange and general trading environment. The company says it expects those conditions to continue in the near term into 2012, until the crisis in Europe is resolved.

Net income for the year ended Dec. 31 is expected to be between $25.6 million and $26.4 million, compared to $21.2 million for the year ended Dec. 31, 2010.

The company says it believe that the long-term trends affecting the pace of foreign exchange trading remain intact -- there was an increase in average daily foreign exchange trading volumes from 2001 to 2010 -- but it acknowledges volumes recently have been hurt by the euro-zone crisis.

FX Alliance's deal was managed by Bank of America Merrill Lynch (BAC), Goldman Sachs Group Inc. (GS), Citigroup Inc. (C), and JPMorgan Chase & Co. (JPM)

-By Lynn Cowan, Dow Jones Newswires; 301-270-0323; lynn.cowan@dowjones.com

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