NEW YORK U.S. commodities brokerage INTL FCStone Inc (INTL.O) said on Wednesday it has dropped plans to buy an online commodities exchange in Asia due to complications posed by newly-issued financial regulations.
INTL FCStone, a mid-sized broker headquartered in New York, announced in mid-May it was seeking a controlling stake in Singapore-based Cleartrade Exchange in its first major push into Asia. But expanded Dodd-Frank financial regulations in the United States have scuttled the deal, company officials said.
"We cannot proceed because the just-published Dodd-Frank Swap Execution Facilities has complicated Cleartrade's regulatory status," INTL FCStone Chief Executive Sean O'Connor told Reuters over the telephone.
Under the Swap Execution Facilities, U.S. regulators led by the Commodity Futures Trading Comission will be able to expand their authority on setting limits for trade positions, among other actions. They also will be able to establish and execute cross-exchange position limits.
Scott Branch, president of INTL FCStone, said in a statement the new rules raised the complexity and uncertainty "on a business of this type operating in the U.S."
INTLF FCStone has determined it is "unable to take any stake in the organization at this time," he said, referring to Cleartrade.
The deal with Cleartrade was in line with INTL FC Stone's previous efforts to grow by acquisitions. Prior to this, it had snapped up MFGlobal's former metals team and its membership in the London Metal Exchange to move into metals derivatives trading.
Cleartrade also would have given INTL FCStone exposure to the potentially lucrative online commodities market as more over-the-counter trading shifts onto screens because of extensive regulatory reform in the United States and G20 countries.
For Cleartrade, the deal would have presented a much-sought investor to fund its expansion.
Cleartrade has broadened into commodities, including energy and metals, after launching three years ago as an online market for over-the-counter freight derivatives.
It now has 43 commodity contracts and connects to major clearing houses LCH.Clearnet, Singapore Exchange Ltd (SGXL.SI) and Norwegian freight and energy clearer NOS Clearing ASA.
"Naturally we are disappointed with this outcome," Cleartrade chief executive Richard Baker said in the statement issued by INTL FCStone.
(Reporting by Barani Krishnan; Editing by Carol Bishopric)