The market for exchange traded derivatives – which are different from the over-the-counter variety traded directly between two parties – has seen strong growth in recent times. Earlier this year, a report from the World Federation of Exchanges, an industry association whose membership features 52 exchanges around the world, showed that, despite the impact of the global financial crisis, trading in derivatives on regulated exchanges surged by 25 per cent in 2010.
The underlying figures were astonishing. More than 22 billion derivatives contracts were traded, according to the report, comprising of 11.3bn futures and 11.1bn options, compared with a total of 17.9bn in the preceding year.
All this bodes well for Patsystems, the AIM-listed trading technology specialist.
The company makes software to enable the trading of exchange traded derivatives, and to manage risk ahead of, and after, the trade. And, thanks to the growing market in these instruments, financial firms are expected to invest heavily in the kind of software Patsystems makes.
Eyeing that demand, the company has been busy bulking up its business, with the announcement last week of a deal to acquire US-based Mixit Inc. The target specialises in sell-side order and execution management systems for trading equities and options, so the deal will bring both new products and asset classes into the Patsystems fold.
In addition to scale, it also brings opportunities to distribute Mixit products through the Patsystems sales network. Beyond that, there's the latter's network of connections between different markets – including the London Metal Exchange and the Tokyo Stock Exchange – which can be used to route Mixit customers' derivatives.
Initially, Patsystems will pay £12.6m. But that could rise to £17.6m, depending on Mixit's performance in the 12 months to March next year.
The City reaction has been good, with Numis highlighting the growth opportunities presented by the deal. "Mixit's customers are mainly smaller brokers at present (although it is moving into larger banks) with around $50,000 revenue per customer and a diversified customer base," the broker said, pointing out that the largest customer accounts for only 4 per cent of the firm's revenues, and that 90 per cent of revenues come from recurring licenses.
Moreover, it only serves the North American market. "Patsystems plans to expand this to major Asian exchanges over the next six months, and thereafter leverage the opportunity to cross-sell equities [and] options capabilities to its growing Asian customer base," Numis said.
Atlas aims to speed up medical tests
Testing for certain infectious diseases can take days, as samples are sent from the GP to the lab, where they are processed before being sent back. The back and forth takes time, and makes the testing more costly than it would be if it could be done on site by the doctor.
Bristol-based heathcare group Atlas Genetics is seeking to change that with what it calls its "ultra rapid, point of care tests" for a range of infectious conditions.
Although it can be applied more widely, the initial focus is on sexually transmitted diseases, and in particular on chlamydia and gonorrhoea. And in addition to offering accuracy, the company says that, instead of having to wait days for a result, its system can diagnose the conditions within 20 to 30 minutes.
The patient goes to the doctor, who takes a sample. The sample is put in a disposable cartridge, which is inserted into the test machine. Within half an hour, the patient has a result, doing away with the logistics, and the cost, of ferrying the sample to the hospital lab.
The platform, known as Velox, is due to be launched in Europe at the end of next year, "followed by rollout in the US, pending regulatory approvals," the company, which is led by chief executive Dr John Clarkson, said.
Last week, Atlas received a vote of confidence in the shape of a £16.9m investment from a syndicate of new and existing investors, which featured some big names from the medical field. The syndicate, led by Novartis Venture Funds and London-listed Consort Medical, includes Life Sciences Partners, one of the world's biggest biotech investment firms, BB Biotech Ventures and the Johnson & Johnson Development Corporation.
"Dr Clarkson and his team have accomplished quite an astonishing technical feat," Florent Gros, managing director of Novartis Venture Funds, said. "We have searched hard and long for novel molecular diagnostic technologies and the Velox platform is a very ingenious solution to the key issues that have hindered the development of ultra-rapid and highly sensitive point-of-care molecular diagnostic instrumentation... We are very excited by the company's prospects."
Origo behind new copper-gold group
Now for some more news from Origo Partners, the AIM-listed, China-focused private equity group that this column has featured before.
Last week, Toronto-listed Brazilian Diamonds completed its acquisition of Origo's stake in Kincora, which owns the Bronze Fox copper/gold project in Mongolia.
The deal gives Origo around 35 per cent of Brazilian Diamonds, which will be renamed Kincora Copper to create a new listed copper-gold company.
Alongside, Kincora raised an additional C$13.6m (£8.8m), including C$500,000 from Origo and C$1m from its affiliates.
The deal should introduce transparency, according to the analysts at Liberum Capital.
"Origo will benefit from having a mark-to-market value for its investment, increasing the transparency of valuations, although this may also increase volatility in the holding," they explained, reiterating its "buy" recommendation on Origo's stock.
Looking ahead, the analysts also raised the prospect of another listed miner emerging from the Origo portfolio.
"Origo's Mongolian resources projects are well placed to create significant upside over the short to medium term, and we would highlight Origo's interest in Gobi Coal & Energy as the next possible IPO in Origo's Mongolian mining portfolio," they said.