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2011 was a very eventful year in the retail forex market. If anything, 2011 was the year of the regulator. Regulators worldwide have stepped up their forex requirements and enforcements finally pushing the market into aggressive consolidation as expected. Most vocal of them all were NFA and CFTC. CFTC required all brokers worldwide to either register with it or stop accepting American clients. Many firms still kept accepting U.S. clients and paid dearly for that as CFTC sued 14 forex firms at the beginning of the year and then 11 more for failing to comply with its various requirements or for accepting U.S. clients. NFA didnt stay far behind and enacted additional requirements while suing brokers like FXCM for millions for various breaches of its requirements. NFA also launched an extensive inquiry into all forex brokers, trying to find out whether there are more deficiencies. Results of this inquiry will probably be announced early 2012. The latest CFTC/NFA drama has also lead to many brokers exiting the U.S. dbFX and IG Markets were just a few.
MF Global was the largest broker dealer to go bust after Refco, reminding of that painful incident in many ways. Over half a billion dollars in client funds are still missing with CFTC, SEC and even the FBI involved in the ongoing investigation. On the legal front, FXCM and FXDD were slapped by class action suits, but these suits havent resulted in anything yet. BNY Mellon and State Street have been battling it out with institutional suitors over allegations of unfair currency pricing. While BNY Mellon settled with some suitors, there are still quite a few others out there claiming they were charged not actual deal rates, but the days highest and lowest. Retail forex volumes kept growing throughout the year, especially during March (Japanese tsunami) and September (European zone uncertainty) but not as fast as during previous years. Total monthly retail forex volume, according to a Forex Magnates survey of brokers, was $4,777 billion. Japanese volumes which used to account for about 50% of global forex
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volume kept shrinking in the past two years due to forced leverage reduction but the local market, which is home to no less than 85 brokers, may still rebound. FXCM emerged as worlds largest forex broker in Q3 mainly due to acquisitions. Indeed FXCM was one of the most aggressive acquirers in the market, acquiring no less than 3 major businesses during 2011 UKs ODL, Japanese GCI and Foreland. Gain Capital slowed down its acquisitions pace and only acquired dbFXs clients base while losing the Interbank FX deal to TradeStation, which itself was acquired by the Japanese Monex Group. Saxo Bank made several interesting deals by acquiring the EuroInvestor portal and buying a quarter of Leverate. 2011 was also the first year of public forex brokers both FXCM and Gain went public during December 2010. 12 months later it seems that the IPO hasnt benefited investors in the stock nor in the image of forex brokers. Maybe it was related, or maybe not, but FxPros scheduled IPO in London was canceled later that year. FXCMs stock price lost over 30% since the IPO while its years low was even lower than that, losing as much as 40% from the original price at one point. Gain is in almost the same situation, losing over 40% at one point and now trading at about 30% lower than the original IPO price. Financial markets will not be so favorable toward the next forex broker trying to go public, be that Alpari, OANDA or FxPro. Binary Options became the latest hot product in the market and although its just a niche of the retail forex market, the competition is already heating up. Three binary options software providers are competing for dozens of brands some of which are already making millions a month while others, mainly due to insufficient marketing budget, are struggling. GFT was the first of the major forex brokers to adopt the new product though using its own software. With the U.S. and Western Europe being severely overregulated, Japan has become the most interesting hub for foreign brokers and software providers. FXCM, Ava FX, OANDA and Alpari have all acquired local brokerages to gain access to the local market. Software providers like Boston Technologies, Leverate, Gold-i, SpotOption, Tradologic and MarketsPulse have all increased their presence there as well, as both MT4 and Binary Options are getting more and more popular in this worlds largest forex market. In the social and media Forex arena there has been a lot of growth as usual and there are dozens of new websites launching every month. These sites typically copy one anothers looks and content and rarely stand out from the crowd. In this way they are very similar to the brokerage business most of
the traffic is controlled by the first ten websites while the rest control the remaining 20-25%. Several new social forex networks have emerged, but for now there is little traction and the market certainly doesnt live up to its expectations. Currensee, FxStat, marketsbook and fxjunction all compete in this crowded market segment while brokers are not quick to embrace the new technology. Its worth noting that eToros own OpenBook is quite successful, while Interbank FX and FXOpen white labeled fxjunction and FxStats solutions respectively. Myfxbook and Forex Factory are going head to head in the forex stats publishing arena. Myfxbook still has the upper hand but FFs Trade Explorer is giving it a decent fight with quite a few enhancements launched lately. ForexPros overtook all other forex media websites and is now the largest forex website in terms of unique visitors by far. The top five media websites ForexPros, FXStreet, mataf.net (now forexticket.com), dailyfx and forexfactory are far ahead of the other websites and the gap between them and all the others is expanding.
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Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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Top 15 worlds largest forex brokers and total volume for the whole retail forex market
FXCM
Saxo Bank Alpari IG Group Oanda Gain (forex.com) GFT FXPro Forex Club FXDD City Index/FX Solutions Interactive Brokers FXOpen CMC Dukascopy Russian Brokers South Korean Brokers Japanese Brokers 500 small brokers Total (all brokers)
Monthly 341 250 202 160 160 134 120 101 95 90 75 60 55 55 50 50 30 1761 275 4777
Daily 15.5 11.4 9.2 7.3 7.3 6.1 5.5 4.6 4.3 4.1 3.4 2.7 2.5 2.5 2.3 2.3 1.4 80.0 12.5 217
2746
2886
q2
q3
q4
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Leverage reduction in Japan has caused its overall market share to decrease from 45% in Q2 2011 to 37% in Q4 2011; still an amazing figure.
Q2 2011
Q3 2011
Japanese 45%
Q4 2011
Japanese 37%
Forecast:
Without any doubt, turbulent times are ahead, and with them continuation of the perhaps short-term trend of volumes growth. Whats mostly driving volumes now is not organic growth, but markets volatility. U.S.-based forex accounts are hardly growing and the only way for American brokers to increase their client base is to acquire foreign brokers. Having said that, it is highly likely that the current volumes growth trend is likely to continue for at least several more quarters. The Japanese market is much dependent on JPYs volatility and contrary to our estimates didnt grow in Q4 2011. If this continues in 2012 Japans market will soon lose its position as worlds largest forex market.
Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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FXCM slapped with class action suit over alleged racketeering and fraud
The plaintiff, William H. Sanders, claims to have lost over $150,000 to FXCM over the years. The two main topics the lawsuit deals with are the demo accounts and execution tactics. Demo accounts serve to attract clients (while not simulating real market conditions) and when clients do switch to a live account they receive a completely different execution. The other point of contention is the execution itself, where it is claimed that FXCM is in fact a market maker which actively goes after profitable clients. Read the full post here.
March 2011 FXCM Announces Fourth Quarter and Full Year 2010 Results, acquires GCI Japan
Full year revenues of $360.3 million, up 12% compared to 2009 Adjusted Pro Forma EBITDA of $120.5 million, up 16% compared to 2009 Adjusted Pro Forma net income of $69.6 million or $0.92 per fully diluted share, up 13% compared to 2009 On March 31, 2011, announced that it completed the acquisition of its GCI Capital, its Japanese franchise Read the full post here and about GCI acquisition here.
Saxo 2010 profits soar, signs Barclays as a white label, censured by Dubai FSA
It seems Saxo not only maintained its strong profitability from the first half of 2010 but has actually grown way beyond industry averages. If public brokers like FXCM and Gain reported earnings higher by 16-23%, Saxo has managed to actually triple its net profit. Not only that, but between the pages you can find that Saxo has managed to sign Barclays as a white label partner. Barclays will join the likes of Citi and even Microsoft, who already lease Saxos solution. It seems Saxo, who was going through some rough patch back in 2009, has completely rebounded, rebranded and all but positioned itself as the banks retail forex platform of choice. Saxo was later on censured by Dubais FSA for AML and client take-on failings. Read the full post here.
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More data about FXCM/ODL, Gain Capital/CMS Forex and ACM/ Swissquote deals
Following the lodging of more updated pre-IPO documents, we are able to gather more data about how these deals were structured. Eventually FXCM paid $2.2 million cash and gave 5.25% of the company for ODL, which was valued at over $50 million. Gain Capital paid $8 million cash and 15% of future net profit for $32 million worth of CMS Forex clients assets. Swissquote paid about $45 million for ACM, receiving 6,500 clients and $120 million in client assets. Read the full post here about FXCM here, about Gain Capital here and about ACM here.
April 2011 Saxo Bank becomes the first to enter Brazilian market
Saxo Bank just made another major step in its ongoing expansion it entered the very attractive but highly regulated Brazilian market and will now offer direct online futures trading including the USD/BRL cross. The Brazilian market, just like the Chinese and Indian markets, is very closely regulated and its not a free economy in the sense we understand it. Entering this market is next to impossible, certainly for Forex brokers. Forex brokers operate there just like in China and India under the table, trying to avoid regulatory scrutiny. Local regulator CVM is closely monitoring the situation and is battling foreign brokers much more effectively than its peers in China and India. Thats why entering this market is simply priceless for any broker. More than getting a share of the market, Saxo Bank gets to be there among the very first putting it in a pole position to be a major, if not the largest, player. Read the full post here.
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Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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May 2011 FXCM Announces First Quarter 2011 Results and April Monthly Metrics
2011 first quarter revenues of $94.7 million, up 23% versus the same period in 2010 Adjusted Pro Forma EBITDA of $25.5 million, up 2% versus the same period in 2010 Adjusted Pro Forma net income of $13.7 million or $0.18 per fully diluted share, down 7% versus the same period in 2010 Customer equity of $775.1 million, up 100% from same period in 2010 Active accounts of 139,900, up 15% from the same period in 2010 Completed the acquisition of FXCM Japan, Inc., the retail FX business of GCI Capital, a FX provider in Japan with over 17,000 active accounts and $114.0 million in customer equity Declared a quarterly dividend of $0.06 per share of Class A common stock Read the full post here.
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FXstreet shaking the intimate forex portals world announcing its income
This is a level of transparency we rarely see here in our hush-hush retail Forex industry: FXstreet, one of the largest forex portals on the web, has just disclosed its record income in April 2011. Bottom line income, from all media deals, is over $515,000. This is a run rate of over $6 million a year. Its safe to estimate that average monthly income is a bit lower, as with all record months, and during last 12 months FXstreet probably saw an income in the region of $5 million. This is an absolutely stunning figure that even beats some of the forex brokers. Our previous estimate was that FXstreet was making around $4 million but it seems that its recently introduced strategy of going multilingual and adding affiliate sites to its media network has paid off faster than expected. Read the full post here.
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FX Solutions rumored to be closing down, new CEO denies, FXDD snatches James Chen
Following the multitude of recent rumors about FX Solutions closing down in the U.S. or looking to move offshore, Forex Magnates had a chance to discuss this with FX Solutions newly appointed CEO David Trew. Read the full post here.
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July 2011 Saxo Bank acquires 25% of Leverate for $12.5 million
Saxo Bank, one of the largest global forex brokers, has acquired a 25% stake in Leverate, one of the largest MT4 and other Forex software and integration providers. Details were not disclosed, but Forex Magnates sources reveal that Saxo bought 25% of the company for $12.5 million, probably part investment in the company and part payout to existing shareholders. This is no doubt a pretty steep valuation for a company making about $4-5 million in income a year (not sure on the net bottom line). But this is also a strategic investment and acquisition of technology in the longer term. Read the full post here.
August 2011 TPG Capital acquires 30% of Saxo Bank, valuing it at $1.87 billion
TPG Capital, the private equity firm started by David Bonderman, bought a 30% stake in Denmarks Saxo Bank A/S, and plans to expand the asset manager and online trader in emerging markets. Several longstanding Saxo Bank investors such as General Atlantic were looking to liquidate their investment for a while now and there were several reports of deals almost complete in the past few months. Its interesting to note that TPG didnt buy out the full 30% General Atlantic holds or bought this block of share from the owners, who more than once were rumored to be looking to liquidate some of their holdings, but from several various investors such as General Atlantic, Banco Espirito and others. Saxo Bank reported solid H1 2011 results last week with operating income being $343 million and net profit of $67 million. Read the full post here.
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NFA fines FXCM $2 million for slippage malpractices, FXCM will credit clients back
NFA has just announced that it heavily fined FXCM for slippage malpractices. FXCM will pay $2 million directly to NFA and will compensate all customers who suffered from this practice since June 2008. The details of this case are not very different from the similar fine of $459,000 that NFA imposed on Gain Capital for using the Virtual Dealing plugin and similar slippage settings. According to FXCMs own estimate, it will pay $8 million more directly to clients. Read the full post here.
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October 2011 Gain Capital reports Q3 2011 Results Net Revenue $53.9 million
Gain just released its Q3 2011 results, which show a solid increase in revenues and improvement in net income. Retail volume was almost unchanged from Q2 2011. Gains institutional GTX platform is experiencing high growth and its volumes were $260 billion in Q3 a little more than third of all Gains volume. Read the full post here. Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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China Union Pay suspends credit card processing for forex brokers for at least a month
This was sent to several forex brokers and is a huge blow to them as it was one of the only few available safe methods of accepting money from Chinese clients: I regret to inform you that we received a formal notification from China Pay this morning regarding the suspension of processing for all the Forex business at the China Pay side commencing 1st Nov for about a months time. Read the full post here.
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US Forex brokers profitability report for Q3 2011 OANDA back on top, profitability up
Finally all US retail forex brokers have updated their profitability stats and the result is surprising overall profitability is up. This is despite the very volatile quarter forex markets have experienced, which typically leads to high losses to forex traders. Apparently forex traders coped with this volatility better than expected. The overall result is that most U.S. forex brokers improved in profitability, with FXCM jumping as much as 8% in clients profitability perhaps with the removal of positive slippage. OANDA is now the most profitable broker, with 35.5% of its clients being profitable in the past quarter. This calculation excluded Advanced Markets, which saw profitability jump by no less than 23.8% but considering it had only 45 account, this is insignificant and skews up the data. Overall American market growth is simply disappointing, as all U.S. retail forex combined have added only 111 accounts in the third quarter of 2011. There are 108,490 active retail forex accounts held with American forex brokers.
% Profit Oanda Alpari Gain Capital FXCM Interbank FX FXDD FX Solutions TradeStation GFT MB Trading PFG FX Club Advanced Markets 22.1% 20.6% 42.2% 35.5% 30.8% 30.0% 30.0% 28.0% 27.4% 27.0% 27.0% 25.3% 23.9%
Q3 2011 % Loss 64.5% 69.2% 70.0% 70.0% 72.0% 72.6% 73.0% 73.0% 74.7% 73.1%
Total Accounts 29,744 2,266 12,847 20,508 11,009 6,564 4,877 1,780 10,103 5,059
Change from Q2 2011 % Profit Accounts Accounts Growth 4.5% (560) -1.8% 3.8% 160 7.6% 4.0% (948) -6.9% 8.0% 1,916 10.3% 2.0% (356) -3.1% 2.6% (268) -3.9% 2.0% 20 0.4% 0.7% 346 24.1% -5.1% (20) -0.2% -0.9% 201 4.1%
2,193 1,495 45
10 (386) (4)
Average profitability change Weighted profitability change Total change in number of accounts Total number of accounts in the US
111 108,490
* Average profitability change excludes Advanced Markets ** Weighted change excludes Advanced Markets and is a more accurate estimate of the average change for the whole market.
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FXCM Reports Monthly Metrics for September 2011 retail volume at peak, acquires Foreland for $17 million
FXCM Inc. (NYSE: FXCM) today announced certain key operating metrics for September 2011 for its retail and institutional foreign exchange business. FXCM also announced that it completed the acquisition of the Japanese broker Foreland for $17 million. I estimated the deal to be in the range of $10-12 million. Read the full post here.
Capital Markets Board of Turkey threatens to sue 32 forex websites but some of them are not even operational
Capital Markets Board of Turkey announced that it is going to file a criminal complaint for the 32 forex websites that are still active after August 31, 2011 after they have released communiqu. Its pretty much a safe bet that this is not actually going to end in lawsuits, but serves as a warning for firms either to register with CMB or quit soliciting Turkish clients. Apparently some of these sites like tr.ac-markets.com or alpari-tr.com are not even operational. Read the full post here.
November 2011 NFA keeps choking the forex industry aggressively raises member fees
NFA is doing an amazingly effective job at spitting in the well it drinks from. In fact, NFA behaves not as a regulator, but as a controlling shareholder of its members as it basically does whatever it wants when it comes to requirements and membership fees. NFA just declared a new dividend for itself by aggressively raising membership fees, which for some strange reason will now be in the region of 2% of forex brokers gross (!) revenue instead of being a flat yearly fee, which it was up until now. To the best of my knowledge, NFA is the only forex regulator charging percentage of volume and/or revenue instead of just charging same membership fee from everyone. Read the full post here.
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Swissquote publishes strong results for first 9 months of 2011 Forex volume up
In line with its semi-annual report Swissquote continues to see healthy growth in its results. Swissquote fully merged ACM operationally and into its books and as expected it fuels its growth. Swissquotes eForex numbers are up on all parameters. Swissquotes volume is up 7.3% to CHF 36.53 Billion a month, however dollar value is down to $41.54B due to exchange rates. eForex assets are up to CHF 130.4 million and client accounts are up 5.7% to 10,464 accounts at the end of September 2011. Read the full post here.
December 2011 Korean regulator moves to severely limit retail forex trading
On December 1, the Korean Financial Supervisory Service introduced Sound Forex Market guidelines for the purpose of considerably stepping up forex regulation in Korea. According to Korean FSS, retail forex traders have a high losing probability due to excessive leverage and insufficient understanding of risks involved. The FSS therefore announced that it is reducing leverage to 1:10 by increasing the initial margin level to 10% from 5% and maintenance level to 5% from 3%. Hedging position will no longer be allowed as well. Furthermore, FSS will demand that securities and futures firms strengthen their risk disclosure statements, including the quarterly P/L account ratio report, and limit excessive promotion of securities and futures companies trying to attract retail users. Read the full post here. Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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FXCM moves retail MT4 support in-house, keeps institutional business with BT
FXCM and BT have certainly had one of the biggest broker-software provider relationships in past years. For about three years now, BT was supplying and supporting all aspects of FXCMs MT4 business retail and institutional. In those three years FXCMs MT4 became one of the largest MT4 brokers in the world though the exact number of its MT4 clients is not disclosed. The largest brokers in the world such as OANDA and Alpari use their own in-house teams for all MT4 matters and I guess its a natural move for a broker that once its client base becomes big enough to move this sensitive part of its business in-house. This is what just happened with FXCM and BT as FXCM is moving all the MT4 technology business in-house. BT will continue providing FXCM with MT4 support for its institutional business. Read the full post here.
ActForex launches FXApps the first platform integrated forex applications store
ActForex one of the largest independent forex platform software providers has just released its FXApps store. FXApps store operates in a similar way to Apples App Store and can be accessed from ActForexs platform. Read the full post here.
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Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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Click here for all the volumes, detailed country reports, industry analysis and more in the premium Forex Magnates Quarterly Reports
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