Citigroup to Sell LavaFX to FXall In a bid to restructure its operations, on Monday, Citigroup Inc. (C) decided to discharge its foreign exchange trading platform LavaFX to FXall, another rival electronic trading platform for foreign exchange. Though the terms of the deal remain undisclosed, LavaFX acquisition is expected to increase the institutional clientele base of FXall by about 800 members. These include the world’s largest hedge funds, banks, broker-dealers, corporate treasurers and asset managers.

FXall specializes in providing FX services to active traders, asset managers, corporate treasurers, banks, broker-dealers and prime brokers. We believe that the acquisition of LavaFX is a perfect fit in FXall’s diverse and strategic portfolio. The acquisition will help accelerate FXall’s participation in the fast growing electronic foreign exchange trading marketplace through higher volume and frequency. A similar amalgamation of foreign exchange trading platforms was witnessed when State Street Corp. (STT) acquired Currenex in 2007.

On the other hand, Citigroup has agreed to the sale as a part of it restructuring strategy that includes de-leveraging some of its assets through a number of steps that include joint ventures, dispositions and asset runoffs. The restructuring strategies are also being initiated primarily on account of raising funds for government bailout repayment and as a part of the damage measure post the global economic meltdown.

Overall, Citigroup shares remain attractive in the long term due to the relatively attractive valuation at current levels, especially, given the substantial increase in its capital, support from the government and several attractive businesses. However, we expect Citigroup to incur higher credit losses in the upcoming quarters as its restructuring process continues. Nevertheless, the company looks forward to capitalizing on the enormous strength of this franchise, once the ongoing de-leveraging is accomplished.

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