Are retail Forex volumes shrinking?

Feb. 14, 2011 6:16 AM ETGLBR, GCAP
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Contributor Since 2011

Gerald Segal is a Managing Director at LeapRate, which provides analysis of the Online Forex Trading world. Gerald's reports are a leading source of information on the size, growth and regulation of the Online Forex industry. Prior to founding LeapRate Gerald was an investment banker for 18 years with firms such as Robertson Stephens, Bear Stearns and Merrill Lynch.

After more than a decade of steady growth, it seems as though the online retail FX world has hit a speed bump. Consider some recent data:

·         FxPro, based in Cyprus and one of the fastest growing online Forex firms, saw a decline of about 20% in trading volume in the second half of 2010.

·         IG Group, one of the largest UK-based firms, took a large writedown and announced that their volume in Japan going forward was likely going to be about half of what it previously was.

·         FXCM, one of the largest US-based firms, reported Q4-2010 volumes slightly below 2009 levels.


There is clearly something going on here, although it is unclear if this is a temporary slowdown for the sector, or the end of an era caused by:

·         increasing regulation and tougher rules (e.g. leverage limits in several key markets),

·         increasing competition, and/or

·         hitting a saturation point after years of aggressive online marketing.


Certainly, there remain areas of rapid growth for the sector, such as certain pockets in the Far East, and the Arabic language world. However, overall industry growth – led by the world’s three largest markets, Europe, the US and Japan – is clearly slowing, or even reversing.


It will be interesting to see Gain Capital’s Q4 numbers to get a better sense of these trends in the US market – although we already have FXCM’s Q4 volume numbers, FXCM does more than 75% of its volume outside the US, while Gain is closer to 50:50 US/intl. Gain reports its results tomorrow. Stay tuned…..


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