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FXCM Rapidly Deteriorating Core Business: A New Perspective.

|Includes: Global Brokerage, Inc. (GLBR)

Feb. 11, 2015 FXCM announced certain key operating metrics for January 2015 for its retail and institutional foreign exchange business. (Press Release).

WHILE THE CEO DID TRY TO ADD A POSITIVE SPIN (see comments in the PR) to the announced operating metrics, as soon as one starts to dig into the number it becomes clear how fast FXCM retail business is deteriorating.

1. Let's Compare FXCM operating Metrics with GCAP (Listed Company) Metrics recently announced

Since GCAP is a listed company, you can find its operating metrics at the following Link:

Link to GCAP Metrics

FXCM average daily Retail Trading Volume was 21.4b USD, up 2% from December 2014

GCAP average daily Retail Trading Volume was 13.3b USD, up 24.29% from December 2014

FXCM Tradable accounts were 223,079 as of January 31, 2015, a decrease of 7,500 from December 2014.

GCAP Funded accounts were 135,340 as of January 31, 2015, an increase of 5,955 from December 2014.

While Record Volatility in the FX market caused a significant increase in retail Trading Volume at GCAP, FXCM did not experience the same Benefits. On the Contrary, FXCM felt victim of the FX market Volatility and its unethical actions against its own customers (See No-Negative Balances Advertisements).

During the first 22 days of January 2015, FXCM Retail Trading Business exhibited even better growth than GCAP (UP 24.29% FROM December):

Through Thursday, January 22, FXCM's average retail customer trading volume per day was $27 billion (Press Release), a 29% increase over the month of December 2014.

Yet, as of January 31, 2015 … for the entire Month of January, the retail customer trading volume per day was only $21.4 billion (a 2% increase over the month of December).

During the last 6 trading days of January 2015 (after it FXCM problems and intention to go after negative balances) became widely known, RETAIL CUSTOMER TRADING VOLUME DROPPED TO 7.3 BILLION PER DAY

Morever, FXCM offers daily updates on the volume traded and transactions performed on its platform at the following link (where u need manually to change the hyperlink last digits to the current Date. In this example, 20150211 being Feb 11 2015):

https://media.dailyfx.com/docs/volume/history/volume-20150211170600.csv

2. Let's Compare FXCM Fastmatch Metrics with Hotspotfx (Listed Company) Metrics to asses impart on Institutional Trading at FXCM.

Hotspot FX is KGC's Award-Winning Institutional FX ECN. Statistics about daily Volume can be found at the following LINK.

Fastmacth is a CS-FXCM JV and can be used as a proxy for FXCM Institutional Business. Daily Volume statistics are published at the following LINK (need manually to change date):

fastmatch.com/docs/Fastmatch_Daily_Volume_2015-02-11.xlsx

FASTMATCH trading volume as a % of HOTSPOTFX trading volume dropped to 13% on Jan 16, 2015, and has since then climbed its way back towards 24%. Before Jan 16, 2015 ... it used to be > 35%-40%.

EVEN is Fastmatch as regained some lost market share (to HOTSPOTFX), daily trading volumes still remain 50% lower than what they used to be pre Jan 15, 2015 event.

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+ Interest Expenses on the New LUK loan

+ Increasing Marketing Expenses in an attempt to gain new clients / avoid current clients leaving

+ Increasing In litigation Costs in an Attempt to recover Negative Balances from Clients

+ Decreasing Trading Activity on the FXCM Platform (Both Institutional + Retail)

+ To be Proposed New regulations on Margins offered by Foreign Subsidiaries

… WILL RESULT IN FXCM OPERATING AT LOSSES FOR THE COMING QUARTERS.

Yet, at $2.25 FXCM is still trading at all-time high levels.

FXCM BELONGS TO SUB $1 LEVELS … this is where it is heading.

BTW, Nice and scaring Divergence IN THE RETAIL TRADING VOLUME (when compared to GCAP)

Disclosure: The author is short FXCM.