FOREX MAGNATES QUARTERLY MARKET

REPORT FOR Q3 2012

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Content Index
1. Q3 2012 Forex Market Overview page 5
2. Media Forex Websites Trafc Survey: Q3 2012 page 14
3. Articles:
Regu|atory Roundup - page 16
Focus on lsrae| - page 18
A Perfect Storm of R|sk, Mu|t|-Assets, and lnnovat|on - page 20
Mob||e F Trad|ng, W|re|ess Trends To The Future - page 26
S|ng|e Dea|er P|atforms - Putt|ng the|r Foot Down |n lnst|tut|ona| F - page 29
Market Data - Gett|ng Access to lnformat|on- page 33
Market Mak|ng vS EON: When & Why? - page 39
Eastern Europe Oountry Reports - page 46
N|ger|a`s F Market- page 55
New Zea|and a 'Safe Haven` for Forex Brokers- page 58
The |at|n Amer|can F Market - page 61
Devexperts - the new phase |n p|atform deve|opment - page 65
N|njaTrader - Wor|d`s Most Popu|ar Futures Trad|ng P|atform - page 69
Tradab|e: Appstore Meets F Trad|ng - page 72
Hotspot F |aunches a Who|esa|e ||qu|d|ty D|v|s|on - page 75
One Page P|atform Snapshots: cTrader and vertexF - page 77
4. Major News of the Ouarter - page 80
5. Deta||ed broker |nformat|on for the |argest brokers |n terms of vo|ume - page 103
6. Recommended Serv|ce Prov|ders - page 120
7. Forex lndustry B|ggest M&As and lnvestments - page 130
5 www.forexmagnates.com
Q3 2012 Forex
Market Overview
O3 2012 |s go|ng to be a quarter that most brokers wou|d ||ke to forget. vo|umes for the |arger |nst|tut|ona| and reta|| forex brokers p|um-
meted |n O3, somet|mes |n doub|e d|g|ts. |ack of vo|at|||ty |n Ju|y-August due to range trad|ng, the seasona| s|ow-down as we|| as ho||days
|n severa| reg|ons severe|y |mpacted brokers` performance. The numbers espec|a||y stand out when compar|ng to the same per|od |n
2011 when volatility was much higher. September brought some relief to the markets as volumes picked up, but not enough to make up
for the lost two months. In general, with the exception of May and a few weeks in September, volatility was extremely low in 2012 affecting
even those frms cons|dered |mpregnab|e. FOM reported a quarter|y |oss |n O2 2012, |ts frst s|nce |t started report|ng. Th|s |n turn may
have prompted |ts dec|s|on to |aunch a dea||ng desk mode| |n Austra||a and the K. A|so, react|ng to dec||n|ng vo|umes, EBS |ntroduced
changes to its trading platform, hoping to lure back traders.
The b|ggest news of the quarter was w|thout a doubt the PFG co||apse, wh|ch took the market and regu|ators} by comp|ete surpr|se. Not
only did clients lose hundreds of millions of dollars but the aftershock was felt across the nancial industry with consumer condence in
the|r brokers deter|orat|ng dramat|ca||y affect|ng vo|umes and depos|ts |n the past few months, espec|a||y |n the S. Hotspot parent com-
pany Kn|ght Oap|ta|`s techn|ca| g||tch cost|ng |t $400 m||||on was another factor contr|but|ng to p|ummet|ng consumer confdence |eve|s
|n the fnanc|a| system as a who|e. FDD and FOM too were under regu|atory spot||ght |n the S and Japan respect|ve|y. Oonso||dat|on
cont|nued |n the markets w|th Reuters acqu|r|ng Fa|| and Japanese brokers GMO, DMM and lnvast do|ng some |oca| shopp|ng.
20 If you have any questions or comments please contact us at report@forexmagnates.com
A Perfect Storm of Risk, Multi-Assets, and Innovation
W|th the BlS report|ng that F vo|umes have r|sen from a ||tt|e
over $1 tr||||on a day |n 2001 to over $4 tr||||on |n 2010 they
even est|mated a peak of $5 tr||||on |n 2011}, there |s no argu-
ing that currency trading has experienced explosive growth
in the past decade. What is lesser known is the even faster
growth |n vo|umes of exchange traded F futures. For exam-
p|e, vo|umes of the OME`s F products rose 10 fo|d from 2002
to 2011, h|tt|ng $120 b||||on Average Da||y vo|ume ADv}. A|so,
the lntercont|nenta|Exchange saw |ts F vo|umes exp|ode
from 2007 to 2011 as |ts Do||ar lndex futures contract became
more popu|ar among traders. The Do||ar lndex |s current|y the
most heav||y traded currency based contract on the lOE w|th
tota| contracts r|s|ng from near|y 1.1 m||||on |n 2007 to 7.75
million in 2011.
One of the common themes to exp|a|n the r|se |n F futures
volumes has been the added credit safety of trading with a
central clearing exchange. After the 2008/09 nancial crisis
and subsequent bankruptcy of dea|ers ||ke |ehman Brothers,
evaluating counter party risk became a bigger issue among
traders. By us|ng a centra| c|ear|ng framework, exchanges
have benefted from the overa|| f|ght to safety. Th|s advantage
is most apparent in exchange traded products that have an
OTO equ|va|ent, where exchanges have been qu|ck to market
these benets.
One of the best examp|es has been |n the ODS market wh|ch
suffered during the crisis as dealers went bankrupt and liquid-
|ty dr|ed up. ln response to the r|sks of the ODS OTO mar-
ket, the OBOE began to market |ts Deep Out Of the Money"
DOOM} Put opt|ons as a ODS equ|va|ent. Even |n F, |n a
report pub||shed by Morten Bech for the BlS, |t was est|mated
that F OTO vo|umes dropped to $3 tr||||on a day |n Apr|| 2009
after peak|ng at $4.5 tr||||on a day |n September 2008. The
dec||ne was c|ear|y seen at EBS where vo|umes dropped from
2008 h|ghs of $250 b||||on ADv to around $100 b||||on |n 2009.
As the crisis hit, traders using inter-dealer platforms suddenly
had to worry about the solvency of the market-maker banks.
Th|s contrasted w|th the OME wh|ch saw much sma||er de-
c||nes |n F trad|ng vo|umes.
Wh||e there |s no quest|on that F futures have beneftted from
a f|ght to qua||ty fo||ow|ng the fnanc|a| cr|s|s, vo|umes were
actually picking up steam much earlier. In addition to the credit
safety of exchanged based trading, the rise in automated trad-
ing and the existence of a multi-asset offering at exchanges
has driven higher volume levels. For example, computers have
helped popularize active trading strategies such as spread
trading and correlations. As a result, automation of these strat-
egies that for years were limited to rms with large IT budgets
suddenly became available for a wider audience of traders.
One such platform that took off as a result of the new popu-
|ar|ty of futures was _TRADER from Trad|ng Techno|og|es.
Within its futures trading interface, the platform also includ-
ed an add-on for spread trading. Traders were able to easily
watch multiple legs of a product and determine if one contract
date was becoming more expensive than another. On such
situations, spread traders would simultaneously enter long
and short trades, and capture the spread.
While spreading was specically popular with xed income
traders, the strategy migrated along all asset classes and
paved the way for corre|at|on trad|ng. Rather than app|y|ng
a spread trade w|th|n one product`s d|fferent dated futures or
within the same asset class, correlation trading involves strat-
egies that benet from deviations among tightly correlated as-
sets. The strategy ga|ned tract|on dur|ng the m|d 2000`s as
market neutra|" hedge funds ga|ned |n popu|ar|ty. Rather than
open directional trades, where traders would need to pre-
dict the future moves of an asset, market neutral strategies
were based on nding correlated baskets of products and
buying the underperformers while selling the outperform-
ers. Due to the d|verse set of futures assets, exchanges
became an |dea| env|ronment for corre|at|on traders. But,
as more and more traders were entering similar trades, it
led to a crowded market and diminishing returns. To boost
prots, traders began to increase leverage of what they had
deemed as safe strategies.
This is Where FX Comes In
With the abundance of cheap money, traders found excellent
terms that a||owed them to |everage up" the|r pos|t|ons. Due
to the S do||ar`s |ow |nterest rates and ava||ab|||ty, the green-
back quickly became the funding currency of choice. As trad-
ers borrowed and so|d do||ars, |t |ed to the currency`s overa||
weakening relative to all asset classes. The result was a tighter
correlation between currencies and other asset classes. As
such, suddenly betas of forex pairs, commodities, equities,
etc became more or |ess |n ||ne F|gure 1}. Ourrenc|es spec|f-
ca||y sh|ned |n th|s env|ronment as the ex|stence of 24 hour
markets, tight spreads, and massive liquidity made it easier
to act|ve|y trade corre|at|on |neffc|enc|es, thereby |ead|ng to
more traders |nc|ud|ng F futures |n the|r strateg|es.
25 If you have any questions or comments please contact us at report@forexmagnates.com
29 If you have any questions or comments please contact us at report@forexmagnates.com
Single Dealer Platforms Putting their Foot Down in
Institutional FX
S|ng|e dea|er p|atforms SDP`s} are an a|| |n one" p|atforms
that banks provide for their clients to disseminate their servic-
es. P|atform offer|ngs |nc|ude execut|on fac|||t|es on the bank`s
liquidity, post trade analysis and proprietary research. While
the platforms have been around since the early e-trading days,
banks were initially marketing them as a means to distribute
their research to clients. As trading has evolved over the last
ten years, as well as volatile periods that included the global -
nancial crisis and greater sensitivity to liquidity and credit lines,
serv|ces prov|ded by SDP`s have a|so been bo|stered. The re-
sult has been an increase in trading tools with more efcient
features to provide clients with full working capabilities on their
single dealer platforms.
The |argest F banks ||ke DB, BS and Barc|ays have |n-
vested heavily in their own bespoke trading platforms for
clients over the last twenty years. After the rst multi dealer
p|atforms MDP`s} were |aunched |n 2001, banks were s|de-
lined by clients who were looking at high-tech terminals with
a wide range of features, but most importantly competitive
pr|c|ng. The SDP was endangered as the mu|t| bank porta|s
were proving to ll the all important gap of competitive pricing
and deep ||qu|d|ty w|th a soph|st|cated term|na|. However, as
the F markets have matured, c||ent needs and requ|rements
have a|tered, pr|ce |s |mportant, but users are a|so seek|ng
new too|s to add va|ue to the|r trad|ng. Oonsequent|y, th|s has
led to a new phase of single dealer platforms with advanced
offerings including aggregated pricing, which banks internalize
to offer liquid contracts, pre and post trade services and most
importantly research and trading ideas.
A SDP can offer banks numerous advantages, most |mportant|y
all the hard work that goes into research and creating the trade
ideas is complemented with a sophisticated executing venue,
whereby the bank actua||y takes on board c||ent fow.
Banks have faced numerous cha||enges when compet|ng
aga|nst the mu|t| dea|er porta|s, w|th the ||kes of Fa|| and
Ourrenex, EON`s have been gett|ng more of the coverage as
the depth of their products and features have favoured the
F trad|ng commun|ty. The mu|t| dea|er p|atforms a|so offer
users fex|b|||ty when work|ng w|th automated and a|gor|thm|c
trading systems, while simultaneously providing favoured pric-
|ng. As such, MDP`s were bu||t w|th soph|st|cat|on and c|ass |n
m|nd, |ntu|t|ve Gl, robust aggregat|on too|s and d|verse order
types such as sweeps, triggers, and time varying orders. For
the mu|t| dea|er p|ayers, the ear|y 2000`s were the boom years,
as volumes migrated from voice to electronic markets, and
p|atforms ||ke Ourrenex, Fa|| and |ava were be|ng pushed by
banks and non-bank nancial institutions.
Another reason for the growth |n MDP`s are the costs as-
sociated with the development of a full single bank trading
so|ut|on for frms |ook|ng to offer the|r own SDP. However, |n
response to the expenses, third party vendors have sprung
up to provide nancial institutions with their own branded
products. The ma|n techno|ogy prov|ders are frms ||ke Oap-
||n, |ab49 and Eurobase. lntegrat|on serv|ces are prov|ded by
compan|es such as So|ace Systems and Dea|Hub, both offer
banks the fu|| capab|||t|es to |ntegrate a bank`s pre-trade en-
vironment, pricing engine, client position keeping, margin lev-
e|s, trade execut|on and c||ent report|ng system. Nonethe|ess,
costs can still be high due to all of the integration aspects
involved with con-
nect|ng a bank`s fu||
slate of services to its
platform.
Another advantage of
the multi dealer plat-
form is the ability for
traders to work with
fewer applications
at once. Rather than
run multiple software
packages from vari-
ous banks, in a multi
dealer offering, trad-
ers can consolidate
their platforms. In re-
sponse, single dealer
p|atforms have begun to use r|ch |nternet app||cat|ons RlAs}
that enable users to call up only specic windows and termi-
nals that they need.
As a result of staying competitive, single dealer platforms have
been increasing their volumes, along with the overall gains in
the F market. Over the |ast s|x years, F has attracted par-
t|c|pants who weren`t trad|t|ona||y exposed to currency trad-
ing, such as pension funds and money managers.
The Technical Infrastructure Managing Data and
Latency
Most single dealer platforms are web-based and are built
with rich internet applications. As technologies have been
advancing and development frameworks such as Silverlight
Mark Briant Evans
52 If you have any questions or comments please contact us at report@forexmagnates.com
Poland Forex Country
Report
Key Facts:
Popu|at|on: 38,501,000 2011 F|gure}
Ourrency: Z|oty P|N}
Membersh|p: E & NATO
Regu|ator: Po||sh F|nanc|a| Superv|s|on
Author|ty PFSA}
Economic Overview
After the co||apse of the Sov|et n|on, Po|and qu|ck|y put ef-
forts in expanding its trade with the West. The result was that
by 1996, 70% of |ts |mport/export was w|th the E, w|th |ts
ne|ghbor Germany be|ng |ts b|ggest trad|ng partner. Po|and`s
government |s cons|dered pro-bus|ness as |ts 19% corporate
income tax level is one of the lowest in the region.
S|nce 1992, Po|and has exper|enced steady GDP growth.
Even dur|ng the g|oba| fnanc|a| cr|s|s of 2008/2009, Po|and
saw economic growth and averted a recession, due to the
size of its population, as well as the economic diversity.
Ourrent|y, Po|and rema|ns an attract|ve |ocat|on for fore|gn |n-
vestment, with many rms opening up industrial manufactur-
ing plants in the country.
Forex Landscape
Hav|ng a deve|oped cap|ta| market |n the form of the War-
saw Stock Exchange has led to a thriving Forex industry in
Po|and. The |oca| market |s |ed by Po||sh broker TB wh|ch
has been an aggressive marketer in the country as well as in
other Eastern European countries. The company has ofces
|n 10 European countr|es. After TB, |t |s est|mated that TMS
|s the second b|ggest Po||sh broker, however Adm|ra| Markets
recently entered the local market and is aggressively increas-
ing market share at the expense of the local players. The large
population has also led to a multitude of foreign brokers enter-
|ng the market |nc|ud|ng Saxo Bank and O|ty lndex.
TB |s a re|at|ve|y estab||shed Forex broker as |t began of-
fer|ng F trad|ng |n 2002. The company advert|ses heav||y |n
Po|and, and |ts ads are seen on||ne, |n pr|nt, and on te|ev|s|on.
They are a|so a sponsor of an F1 rac|ng team. One of TB`s
market|ng methods |s the use of demo trad|ng contests. TB
offers Forex trad|ng through the MT4 p|atform and has sepa-
rate platforms for its equity and options products. TMS also
began offering Forex trading in 2002, and currently markets
the product w|th two brands: TMS and GO4. W|th|n the |oca|
market, TMS |sn`t cons|dered to be an aggress|ve marketer.
However, they do offer an on||ne currency exchange serv|ce
ca||ed GOOash wh|ch he|ps ra|se awareness for the broker.
lnterest|ng|y, Po||sh banks haven`t been very |nvo|ved w|th of-
fering Forex trading. This is due to the existence of healthy
trading volumes from traditional trading products such as
stocks and futures. However, due to the |ncrease |n Forex |n-
Average ination rate in 2000-2011
0,0%
2,0%
4,0%
6,0%
8,0%
10,0%
12,0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
terest as well as seeing foreign institutions begin to market
|n Po|and, more banks have begun to offer a Forex trad|ng
product.
Market|ng |n Po|and, Forex compan|es have var|ous on||ne
media outlets to advertise with. They include general news
portals like www.waluty.onet.pl and www.biznes.interia.pl, and
nancial sites like www.stooq.pl. Forex only portals include
www.fxone.pl.
Expanded Report is available in Forex Magnates web-
sites Research section
GDP and ination levels have remained steady in Poland
since the 1990s. However, unemployment remains a
concern for the country. This is partially due to the coun-
trys historically large agricultural workforce. With the sec-
tor becoming less important to the overall economy, it has
led to job losses.
Unemployment rate in 2000-2011
0,0%
5,0%
10,0%
15,0%
20,0%
25,0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
65 If you have any questions or comments please contact us at report@forexmagnates.com
Devexperts - the new phase in platform development
The online Foreign Exchange trading market has been domi-
nated by a handfu| of trad|ng p|atforms. Brokers who entered
the market |n the ear|y 2000`s started off w|th the|r own un|que
proprietary platforms, but as the market grew and expanded
the wh|te |abe| concept four|shed and new frms were set-
ting up using existing off the shelf technology which was the
standard |n the market. Devexperts a fnanc|a| techno|ogy frm,
had developed its trading platform exclusively for a couple of
c||ents |n fnanc|a| der|vat|ves outs|de Russ|a}. The p|atform
has been very successful and came with a wide range of use-
ful features from a trader and broker perspective.
Forex Magnates team caught up w|th Devexpert`s vP of F
Products Stan|s|av Sto|yar to fnd out about the frm and |ts
products as they prepare to release a new trading platform
aimed at the masses.
Please provide background of the company, projects
you have worked on in the past, company registration,
directors and their expertise.
Devexperts |s a fnanc|a| software-deve|opment company w|th
headquarters |n St. Petersburg, Russ|a. Our R&D centers are
|ocated |n St. Petersburg and Rostov-on-Don, wh||e our sa|es
offces are |n Japan and the SA. Devexperts |s |ed by a team
of dedicated professionals, each with 10+ years in nancial
software industry. Ten years ago, we made a decision to have
a very clear focus and become experts in a specic area. Even
though from time to time there were multiple opportunities to
engage in various projects not related to nancial industry, we
were able to stick to this decision maintaining our focus and
grow|ng expert|se. We||, actua||y, one of Devexperts so|ut|ons,
monitoring system, is not directly related to nancial indus-
try, but the core of this system is the same high-performance
message bus that has been created in-house for our trading
platforms.
Why has the company only worked with two non-Rus-
sian companies in the past?
For quite some time we have two major clients, at the same
time we also have enjoyed working with nancial companies
|n the Russ|an market for over 8 years. Major secur|t|es bro-
kers |nc|ude, K|t F|nance, BFA and OS|. Add|t|ona||y Russ|a`s
exchanges, RTS and MlOE, recent|y underwent an M&A |nto
Moscow Exchange} have been our c||ents s|nce 2006.
Ourrent|y MlOE-RTS uses Devexperts FAST and Fl gate-
ways as we|| as mon|tor|ng system MARS. Over the |ast two
years our sa|es & market|ng |nterests have expanded geo-
graphically, we opened representative ofces in Tokyo and
Shanghai, in addition to our presence in USA.
Dur|ng |ast year we have been work|ng w|th another European
client on one of the most intriguing projects yet to come out of
the company. It is scheduled for launch this autumn.
We are also working on an exciting project for equities and
derivatives in Asia. It is working with a partner rm in India and
is looking at a solution to launch high frequency trading on
the |ead|ng stock exchange NSE Nat|ona| Stock Exchange
|n Mumba|}.
Devexperts |s a|so a market data vendor, we prov|de market
data for all US-traded instruments as well as historical data,
corporate actions and fundamentals.
We be||eve Devexperts |s becom|ng a better-ba|anced ser-
vice/solutions vendor for the nancial industry. We feel that we
have not spent enough resources on sales and marketing in
the past, as per our new growth strategy this will be changing.
What are the main reasons why you decided to offer
your platform to the wider market?
For the past several years we were regularly receiving leads
suggest|ng some brokers were w||||ng to work w|th us as a
software vendor, system prov|der} based on our exper|ence
and proven record |n th|s doma|n. However we found that c||-
ents weren`t ready to make substant|a| |nvestments |n an ex-
pensive project of developing their system from scratch.
Nowadays c||ents rather favor an opt|on of hav|ng a ready
to use system to jump-start their business, which may be
further developed and customized according to their needs
as they go.
So, one day we realized we have enough experience and
domain knowledge to build a generic online-trading sys-
tem and offer it as a simple, yet powerful turnkey solution
or substantial parts of it as building blocks for more complex
environments.
What makes your platform different?
Over the last decade we have built platforms that were tested
in the most difcult market conditions, the rapid price move-
ments of 9/11, and the May 2010 F|ash Orash", our systems
80 www.forexmagnates.com
Major News of the
Quarter
NFA hits FXDD with multiple charges including
asymmetric slippage, ne will cost it over $3.5m
The NFA revea|ed that |ts 2011 aud|t of FDD showed defc|enc|es |n the broker`s record keep|ng, ant|-money |aunder|ng program
and other areas of the frms operat|ons. NFA may fne FDD at |east $3.5 m||||on due to order execut|on process wh|ch wou|d
award slippage to the broker when it was in its favor, as opposed to when the price favored the customer.
Read the entire article
FXCM Japan gets away without business
suspension
After be|ng charged by the Japan FSA for severa| accounts of v|o|at|ons of procedures, FOM escapes w|thout a bus|ness suspen-
s|on or fne. The fna| verd|ct was for FOM to de||ver to the Japan FSA a p|an on how |t wou|d amend a|| of |ts defc|enc|es. The
app||cat|on of the p|an w||| be tracked quarter|y, and the fa||ure to de||ver on the p|an cou|d |ead to a suspens|on. For FOM, the
dec|s|on was v|ewed pos|t|ve|y, as the |anguage of the not|ce was so harsh that many |n the market expected that FOM may face
a bus|ness suspens|on. ln |t O2 2012 f||ng FOM revea|ed that |t pa|d about $2.3 m||||on |n 'trad|ng system matters` to Japanese
clients probably to settle this case.
Read the entire article
July
103 www.forexmagnates.com
Detailed broker information for
the largest brokers in terms of
volume
FXCM
Saxo Bank
Alpari
IG Group
OANDA
Gain Capital
GFT
CMC
FxPro
GMO Click Securities
DMM.com
CyberAgent FX
Money Partners
Gaitame.com
120 www.forexmagnates.com
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