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Reflecting on an eventful 2012, many developments have taken place. A shift in dynamic has been compounded by decreasing volumes throughout the marketplace.
Events during the inaugural part of 2012 set the scene for the following months ahead, where the entire market showed a significant decrease in trading volume compared with the previous year. Japan, whose market is renowned across the industry for its significant volume, was no exception with large number of brokers reporting plummeting trading volumes. This downward trend is attributable in part to last year’s stringent imposition of leverage restrictions by Japanese regulators, whereby 25:1 became mandatory. Japanese traders have traditionally shown higher volumes over previous years, and are less risk-averse than traders in certain other markets, therefore perhaps seeking to invest internationally where they are not bound by such conservative leverage policies. To further impede confidence, trading volumes generated by institutional brokers and ECNs were down substantially as well. Subsequently, the Japanese forex market, once the very largest, accounting for 45-50% of all forex transactions few years ago, has now become considerably smaller. In the last 2 months of 2012 the Japanese volume for several major brokers has managed to rebound but it is still debatable as to whether it is the beginning of recovery or a temporary spike.
As Japan stagnated, Europe’s industry participants too displayed major volume decreases, citing the global economic slowdown as one of the reasons. It is also attributable to a decline in trading volatility since the forex market entered an unprecedented range of trading and thus did not present opportunities to traders. Most affected by this were institutional brokers, for instance FXCM’s institutional trading unit reported volumes dropping by 60% and more. Additional reasons cited for the plummeting volumes were increased global regulations and major surge in total number of brokers – increasing the competitiveness. The decline in Euro-Dollar trading accelerated during the first 6 months of the year, seeing UK spot trading fall by 24% according to the Bank of England’s report.
One forex trading venue which has bucked the trend is LMAX Exchange, who managed to grow by offering services as a liquidity provider to start-up ECN brokerages wishing to use their MT4 bridge. In packaging the entire system to facilitate aggressive cost-per-million fees and connection to the MT4 via bridge comprising a full brokerage system that can be implemented within a matter of days, this diversification has proved a wise one for LMAX, who delivered an annualized run-rate of approximately $300 billion in April 2012 alone. The stratospheric increase in number of trades rose from just 4,000 a month in the first quarter of 2011, to 300,000 per month by April 2012. In December 2012 LMAX was spun off from parent company Betfair in a management buyout led by CEO David Mercer.
Industry giant FXCM has considered 2012 a year of studying its smaller competitors for the purposes of acquisition, making this low volume year an investment into their future. FXCM purchased a 50% share of Lucid Markets, a UK based market maker, in mid-2012. An institutional forex broker, Lucid Markets was founded three years prior to its acquisition by FXCM, and brought in revenues of $149 million during 2011. FXCM issued shares to conduct the acquisition, to the value of $176 million. The point of interest here is that FXCM were able to purchase 50% of Lucid at a value well below average multiples, and in doing so got in on a company which had an EBITDA of $113 million in 2011, which was more than FXCM itself’s 2011 revenue of $112 million. This shows FXCM cashing in on the weak forecasts for volumes in the US and Europe, as their previous acquisitions had been in the Japanese market (GCI and Foreland respectively). It may be fair to say that such an acquisition would not have been possible at this price under normal market conditions.
Binary options have been on the increase, with many new companies springing up and attracting retail customers, having an impact on forex volumes, especially those of private investors new to the online trading world. During the year, binary options providers such as SpotOption, Tradologic, MarketsPulse, TradeSmarter and TechFinancials, whose platforms are aimed toward white label partners, saw a major influx in demand from forex brokers looking to diversify their offerings.
For new entries into the binary options space, this is a straightforward enterprise. Binary options firms simply provide the entire CRM and back office facilities, and the white label partner employs a sales and retention team and conducts the customer facing activity only.
Social, Auto and Copy-Trade
Social and copy-trade trading platforms have been marketed widely this year, and have become a point of great interest worldwide, and in particular the Far East. So much so, that MetaQuotes, the platforms market leader, has been trialing their own copy-trade trading system which will be integrated into the MT4 platform and released imminently. There will no doubt be a great many brokers who will look to market this feature as a method of increasing volume.
Trading the market while on the move via smartphone applications has increased in popularity this year. A great many brokers added the option of mobile trading to other smartphones as well as the iPhone, as a result of such releases becoming widely available to brokers as off-the-shelf software. One example of this is the integrated package offered by MobiTradeOne, who offer multiplatform trading systems for smartphones. MobiTradeOne have geared their entire solution toward easy access to trading by including full compatibility with iPhone, Android, Windows Mobile, Blackberry and JAVA enabled mobile phones. GFT offer a branded mobile trading solution by the name of DealBook. Within the DealBook platform offering, a DealBook-Mobile option has been added to the brand, which from a marketing perspective keeps it integrated along the lines of their web and downloadable platforms.
Increased popularity of mobile solutions led MetaQuotes into taking mobile firm Xogee to court in Cyprus claiming it hacked its protocols. Xogee was the most popular provider of Metatrader mobile solutions.
With the faster connection speeds and wide availability, plus the ability to use on all tablet PC devices, it is a case in point as to whether the new levels of accessibility will serve to increase trading volumes worldwide over the next year.
Institutional and Retail Forex volume in 2012
Institutional volumes: Q3 2012
Retail volumes: Q3 2012
Top 15 retail brokers (excluding Japan) Q3 2012:
Major news that dominated the 2012 year
CFTC issues an injunction against InstaTrade Corporation and ZTRADEFX LLC
Instatrade Corporation, aka Insta Forex, and Ztradefx LLC were two of the 14 firms sued by the CFTCearly last year. Ever since most firms didn’t bother to settle with the CFTC but some did. Last week we saw that FXOpen settled the case with the CFTC paying $140,000 fine.
Without any official announcement the following information appeared on NFA’s website. Apparently both companies were sanctioned in the following way:
- TRADING PROHIBITION 09/14/2011
- STOP SOLICITING 09/14/2011
- OTHER (SEE NARRATIVE) 09/14/2011
- PERMANENT INJUNCTION 09/14/2011
- MAY NOT APPLY TO REGISTER 09/14/2011
- FINE $140000 09/14/2011
- MAY NOT OPERATE AS PRINCIPAL 09/14/2011
This step probably took place because both companies didn’t settle and are not in the process of settling. There is no additional information available at this point. I’m awaiting clarifications from the NFA.
Boston Technologies attains FSA license for its prime brokerage Boston Prime
Boston Technologies was just granted an official FSA license to its prime brokerage venture – Boston Prime. Boston’s BT Prime serves as a prime brokerage for BT’s clients plugging them to liquidity of a dozen or so banks. This also is used as a feed to those brokers who require it.
Boston’s licenses are found here and are:
- Agreeing to carry on a regulated activity
- Arranging (bringing about) deals in investments
- Arranging safeguarding and administration of assets
- Dealing in investments as agent
- Making arrangements with a view to transactions in investments
Boston pushed for this status as it was both required in many jurisdictions and will be perceived as more organized and safe for all of its clients.
CFTC settles with 5 brokers, penalizes 2 others
This was one of the biggest news items last year – CFTC sued 14 forex firms (and then 11 more) for various infringements of its laws, including accepting US clients. Some firms (offshore ones) decided to ignore this all together and kept accepting American clients, some stopped accepting them but didn’t settle and some managed to settle their cases. FXOpen was certainly the largest of the brokers sued and finally managed to settle this issue. This should help FXOpen re-establish its brand and become regulated more easily in various jurisdictions.
Ava FX receives ASIC approval, launches Australian office
Ava Capital Markets Australia announced that they will offer Ava’s trading services to local and Asian traders. Australia has quickly become a major center for forex brokers trying to tap the Asian markets. As operating in China is forbidden (more or less) and Hong Kong license is both limiting and expensive, Australia stands out as the only stable location for forex brokers looking both for sane regulation and ability to support Asian clients in their time zones. Australia also offers a highly advanced capital markets climate and multilingual staff which helps run operations smoothly.
Saxo Bank Reports 2011 Results. Revenues Up but Volumes Down
Saxo Bank showed continuance of its impressive results from 2010. Although net profit was down by 4% and volume decreased by 14% (comparing H2 2011 to same period in 2010) its overall revenue was 6% higher and client assets have grown over 26%. Saxo’s staff increased by over 40% which may explain the drop in profitability however the drop in volume is alarming and may have continued into 2012 as reported by other large players such as ICAP and Reuters. Saxo Bank’s operating income increased 6% in 2011 to reach DKK 3.53 billion, compared to DKK 3.34 billion in 2010. The Bank continued to invest in developing the business which meant that staff costs and administrative expenses increased 12%. Thus, net profit was DKK 618 million, down 4% from the previous record year. EBITDA of DKK 1.16 billion increased 4% compared to 2010.
London Stock Exchange acquires majority stake in LCH, values it at €813 million
LCH recently reported healthy 2011 results with net revenues up 16% to €387.2 million (2010: €335.0 million). LCH launched the much awaited ForexClear service at the end of 2011. LCH offers the service on nine currency pairs for interbank trades in currency options.
- Accepting LCH.Clearnet Shareholders will receive €20 per LCH.Clearnet Share acquired, comprising the Offer of €19 per LCH.Clearnet Share in cash plus €1 per LCH.Clearnet Share from the Special Dividend (payable by LCH.Clearnet in 5 years, subject to deductions)
- LCH.Clearnet total implied value of €813 million (£677 million), comprising total implied Offer value from LSEG of €772 million (£643 million) plus Special Dividend of €41 million (£34 million) (payable by LCH.Clearnet in 5 years, subject to deductions)
- LSEG to become majority owner of LCH.Clearnet, holding up to 60 per cent.; LCH.Clearnet Shareholders to retain at least 40 per cent
- Maximum consideration to be paid by LSEG will be €463 million (£386 million), funded from existing resources and bank facilities
MetaQuotes released Metatrader 5 Gateway to Currenex
MetaQuotes probably released in the past two weeks more news and updates than it did in 2 years and it’s a good sign for this company as otherwise it may have become too confident in its market leadership and lose the market to more aggressive competitors. Lately Metaquotes rolled out its MT4 iPhone app, Gateway to CitiFX Pro and HotSpot, certification bySingapore Exchange and MT5 for Android Tablets.
Today is the Currenex turn. MetaTrader 5 Gateway to Currenex is Liquidity Gateway that provides a simple, fast and secure integration solution to offer liquidity through their MetaTrader 5 Trading platform. Currenex platform represents one of the largest ECN systems operating with Forex instruments and getting feed from more than seventy largest financial organizations. Direct quotations provide users with the ability of complete independent, transparent and reliable control over the prices, which precisely reflect the market situation at any time.
PFG Sued for Allegedly Ignoring Red Flags in the Crown Forex Case
This case just gets more and more complicated. Crown Forex is an extremely complicated case of a forex brokerage that turned out to be a ponzi scam. We’ve already reported today about another uncovered forex ponzi brokerage (One World Capital) – this time in the US.
To those who don’t remember, Crown Forex S.A. was a forex broker based in Switzerland. On 29/05/2009 FINMA closed Crown Forex S.A because of potential liquidity problems. FINMA is investigating the company and its executives. A month later we learned that there was another scandal associated with this broker – a Twin Cities fund manager was charged with scamming his investors for over $190 million, part of which was invested with Crown Forex. This fund manager, Trevor Cook, has used part of the money to acquire a controlling stake in Crown Forex S.A. Another significant fact that went unnoticed is that the same Trevor Cook owned 35% of JDFX – a well known Swiss forex liquidity provider. Trevor Cook was recently sentenced to 25 years in jail for his part in this massive scam.
MetaQuotes Announced Hotspot FXi Integration Gateway
MetaQuotes released an Android tablet version of its MT5 trading platform and in Feb¬ruary 2012, and it sent an email to clients announcing the release of HotSpot gateway. HotSpot is not the largest ECN yet but it is certainly growing at impressive pace although just like all other ECNs out there it experienced a slowdown in Q1 2012 volumes.
FXall Successfully Completes IPO, Priced Well Below the Range, Rises 14.5%, Announces 2011 as Profitable
FX Alliance (or FXall in short) successfully completed its anticipated IPO on February 9th 2012. FXall trades on NYSE under the FX ticker. FXall had to slash its offered price to $12.00 from the originally expected range of $13.50-$15.50 to be able to attract enough investors.
FXall is an independent electronic foreign exchange platform, giving over 1,000 institutional clients a trading edge with choice of execution, end-to-end workflow management, and straight through processing. For the fourth quarter of 2011, total revenues increased 15.8% to $29.6 million from $25.5 million for the fourth quarter of 2010. Net income increased 51.2% to $7.8 million, compared with $5.1 million for the same period last year. For the full year 2011, total revenues increased 19.4% to $118.3 million from $99.1 million in 2010. Net income increased 23.2% to $26.1 million compared with $21.2 million in 2010.
MT5 Approved on Mauritian Exchange
MetaQuotes is pleased to see MT5 its latest advancement on the award winning MT4 being certified as an approved trading platform. The Global Board of Trade (GBOT) is Mauritius’s first multi asset brokerage venue and the exchange has given MT5 status as
‘independent software vendor’.This follows the news where MT5 was successfully approved by Singapore’s Mercantile Exchange. MT5 is a follow on from MT4, both platforms are designed by technology solutions provider Metaquotes. Metaquotes originates from Kazan in Russia, over the last decade Metaquotes has been the most successful platform provider in the online FX trading industry. The interbank bridge has uplifted Metatrader 4 from a pure retail to a hybrid offering.
NFA Steps Up Segregation Rulemaking
Following MF Global’s debacle NFA and CFTC are seeking ways to strengthen client funds protection. One of the obvious ways of doing that is the segregation requirement which for instance didn’t exist for forex brokers until now. This will soon change.
Forex Magnates sources also reveal that CFTC may soon enact a much more limiting rule which will require brokers to keep client funds with custodian banks. While from first glance this may make sense the problem is that this will further increase the extremely high compliance costs for American brokers and make dealing with clients even more burdensome.
City Credit Capital settles with the CFTC for Accepting US Forex Clients
City Credit Capital (CCC) became the latest broker to settle with the CFTC for accepting US clients. In March 2012 Windsor Brokers settled, preceded by Enfinium, FXOpen and InterForex. Federal Court in Illinois Orders City Credit Capital, (UK) Ltd. to Pay $140,000 Civil Monetary Penalty for Acting as Unregistered Retail Forex Dealer City Credit Capital also ordered to cease soliciting U.S. customers and to modify its website.
CFTC Puts an End to NADEX’s Political Binaries
As if this wasn’t a fact already – CFTC just officially announced what we already knew: it won’t allow NADEX to issue political binaries citing their gaming nature.
CFTC Issues Order Prohibiting North American Derivatives Exchange’s Political Event Derivatives Contracts Washington, DC – The Commodity Futures Trading Commission (CFTC) issued an order pursuant to Section 5c(c)(5)(C)(ii) of the Commodity Exchange Act and CFTC Regulation 40.11(a)(1), prohibiting the North American Derivatives Exchange (Nadex) from listing or making available for clearing or trading a set of self-certified political event derivatives contracts. The contracts are binary option contracts that pay out based upon the results of various U.S federal elections to be held in 2012.
CME Reports Slow April 2012 with Forex Volume Down 5%
Lack of volatility took its toll on brokers and exchanges alike. Most forex brokers reported almost 6 slow consecutive months with reduced volatility and hence profitability.
CME, the world’s largest forex exchange also reported a downward trend transacting 5% less forex volume in April 2012 than in April 2011. CME Group announced that April 2012 volume averaged 10.7 million contracts per day, down 12 percent from April 2011.
Total volume for April was more than 225 million contracts, of which 85 percent was traded electronically.
FXall Announces Positive First Quarter Results
FXall, a leading independent global provider of electronic foreign exchange trading solutions, reported financial results for the first quarter of 2012.
For the first quarter of 2012, revenues increased 10% to $30.0 million from $27.4 million in the first quarter of 2011. Adjusted Net Income decreased 12% to $5.2 million, or $0.18 per share, from $5.9 million or $0.20 per share for the same period last year. Net Income decreased 10% to $4.6 million, compared with $5.1 million for the same period last year. Assuming the conversion of Series A Preferred Shares to common shares on a proforma basis as of the beginning of the period, net income per share was $0.16. Reflecting the conversion of the Series A Preferred Shares at the completion of the Initial Public Offering, earnings per share was $0.13.
Leverate launches LXRisk: a Cutting-Edge Risk Management Software Platform
Leverate released LXRisk, an innovative risk-management server that presents forex brokers with an accurate view of exposure in a clean and user-friendly interface. “LXRisk is a revolutionary risk management system for brokers. At a single glance, brokers can view an exact overview of their coverage and non-coverage positions, as well as their P/L for, both, currency pairs and single instruments.” remarks Leverate’s VP Products Itay Damti. “The combination of a ‘single-screen complete broker status’, in addition to managing complex execution strategies, gives LXRisk clients the best possible risk management tools available in the industry.”
NFA Proposes New Financial Requirements for FCM Treatment of Customer Segregated Funds
The NFA stepped up its segregation rulemaking after releasing four preliminary recommendations in March, two months prior. It was a natural step following MF Global’s collapse and the loss of confidence for many investors in the regulatory agencies. It proposed new financial requirements that will strengthen regulations regarding the treatment and monitoring of customer segregated funds held by futures commission merchants (FCMs). The proposed new requirements were approved by NFA’s Board of Directors on May 17.
Hotspot Enjoys May Volatility with Increase in Daily Trade Volumes MoM 14%
The French elections and further uncertainty have had a positive impact on trading volumes. Gold dropped below the all important 1600 mark and EUR USD swiftly declined to reach a low of 1.23. Overall, May was a positive month for FX trading volume. In May 2012, Hotspot FX volumes bounced back from a slower April, but remained below 2011 levels, in line with broader industry trends. Average Daily Volume (ADV) increased 14% to $56.5 billion in May with a total of $1,299.2 billion transacted through the platform. Among publicly reported spot FX volumes (Hotspot FX, ICAP/EBS, Reuters, FXall) Hotspot FX accounted for 8.5% of the volume in April 2012 .
Binary Options to be Regulated by CySec
Despite CySec denying its intention or even interest to regulate binary options in the past, today we receive news that this has changed. According to Map S.Platis, and following its extensive lobbying, CySec has made the decision to start regulating this activity.
This is no less than a revolution in the binary options market which was completely unregulated in EU up until now. According to Map S.Platis they are already working on 3 binary broker applications. CySec just published its decision online.
Saxo Bank Officially Enters Turkey, acquires Değer Menkul Değerler
As we reported back in March 2012 Saxo Bank marked Turkey as one of its most important targets on its expansion plans. Lars Seier Christensen, Saxo Bank’s co-founder and co-CEO, was in Istanbul to announce the opening of the local branch while the rumour had it that Saxo was working on acquiring a local broker.
Saxo finally completed the acquisition of Değer Menkul Değerler, a small local broker with securities license (now owns 89.5% of the company), will rename it to Saxo Capital Markets Menkul Değerler A.S. and will soon start ramping up its local operations. Turkey recently enacted forex regulation leading to massive exodus of brokers from this very large market. About 11 local brokers have since received the new forex license and several more are pending.
Metaquotes Takes Xogee to Court Claiming it Hacked its Licenses
A total of 9 injunctions were imposed on Xogee and 2 of its employees including the prohibition of: selling and leasing the iPhone/ iPad/Blackberry/Android Trader for MT4, connecting to Metaquotes servers and data centers, recompiling and reverse engineering of Metatrader communication protocols, and more.
Why Your Enterprise’s Finances Rely on Employee TrainingGo to article >>
FXCM Announced Plan to Acquire Lucid Markets for $176 million
FXCM made a move forward in its journey into the institutional forex market by acquiring Lucid Markets, the secretive institutional forex market maker. Lucid is considered to be one of the biggest market makers and feed providers in the institutional industry, however little is known about the firm, which transacted $13.4 trillion in volume in 2011 (over $1.1 trillion a month). The deal is FXCM’s biggest by far and used quite a substantial amount of the company’s available cash, making it a market market (through Lucid) for many institutional brokers.
MetaQuotes Integrates MT5 With Integral’s FX Grid
MetaQuotes continued its effort to plug the Metatrader 5 platform into as many liquidity sources as possible. The latest were Currenex and CitiFX Pro. Connecting to Integral’s FX Grid will allow brokers with the right liquidity relationships to plug MT5 into liquidity pools they are able to access through FX Grid. The connection of the trading platform with the diverse sources of liquidity on FX Grid has obvious advantages: brokers receive additional means for covering risk, and traders can access better prices.
Traiana Develops CFD Offering
Traiana, the leading provider of post-trade solutions, announced that the Traiana Harmony CFD equity swap network has added 26 executing brokers for give up processing and 11 prime brokers for enhanced client servicing for buy-side clients in the past year. These prime brokers, including Barclays, BofA, Merrill Lynch, Credit Suisse, Deutsche Bank, JP Morgan, Morgan Stanley, and UBS are proactively rolling out the solution to their clients.
The total number of CFD equity swap participants on the network now includes more than 85 executing brokers, 14 prime brokers and a rapidly growing number of buy-side firms, cementing Harmony’s position as the post-trade standard for the CFD equity swap market.
Traiana Harmony processes more than US$700 billion daily in global FX, exchange traded derivatives, and CFD equity swaps; with over two million messages per day flowing through the network. Banks and buy-side firms using Harmony for CFD equity swaps increase end-to-end visibility and control with automated, real-time post-trade processing for trade give-ups, allocations, swap confirmation processes, and clearing.
FXOpen Launches ASIC Licensed Brokerage
FXOpen, a fairly large forex broker, was recently granted an ASIC license and officially launched its service in Australia. Australia, as we covered in our news extensively, has become to the Asia-Pacific region what Cyprus is to Europe – a convenient gateway for most forex brokers. Lately we’ve seen Saxo Bank, Ava FX and Admiral Markets, to name a few, acquire an Australian license.
Australian regulator is considered one of the strictest but also one of the more welcoming ones meaning that unlike NFA they actually welcome financial businesses as long as they comply with their standards. Lately however with the influx of forex brokers ASIC is monitoring this market more closely and is introducing new rules to make sure client funds are safe.
Boston Prime Partners with Tradency to Offer Mirror Trader™ to its FX Prime Brokerage Customers
More and more software/technology cooperations are being announced lately as one of the ways to grow in this tough market and reach brokers is by partnering with other firms. cTrader/Spotware and Divisa /TradeSpotFX have partnered in July this year in a very similar way while most of the firms in the market realize that operating alone is no longer a viable option.
IBFX Rings the Changes: Consolidates Forex Under IBFX Brand, Launches Institutional Platform and More
IBFX was acquired by Tradestation in November 2011 while TradeStation itself was acquired by Monex Group in June 2011. TradeStation launched its own forex unit TradeStation Forex in April 2011. Now we see all this consolidation shaping up:
- Gary Weiss, President of TradeStation Forex, became the President of IBFX
- All forex business (IBFX and TradeStation Forex) is being consolidated under the IBFX brand
- IBFX will offer TradeStation’s platform to its clients
- IBFX launches a new institutional platform called TradeStation ifx
Dubai’s Premier Commodities Exchange Volumes Keep Rising
The Dubai Gold and Commodities Exchange continued its streak of impressive growth as the venue traded 938,837 contracts in August, valued at $34.81 billion, registering an increase of 71% compared to the same month last year. In currencies, the growth was even higher as the segment measured a 179% rise in trading.
Gary Anderson, Chief Executive Officer, DGCX, said, “Continued robust trading throughout the Holy Month of Ramadan, a typically slow period of business, reflects the growing demand of DGCX products and services in this region. Tight spreads and the ability to generate large trading volumes rapidly and efficiently indicate the continued growth and maturity of our marketplace.”
EBS Faced Difficult August as Volumes Below $100 billion
EBS, one of the world’s largest inter dealer forex venues announced trade volumes for the month of August of $95.5 billion a day. The figure came on the back of negative sentiment in the market from the Euro zone debt crisis. In its six years of recording volumes, the $95.5 billion figure reflected one of EBS’s poorest months, and was much lower than July’s $136.2 billion number.
Canada the Next Destination for Forex
Canada is fast becoming a hot spot for derivatives trading and Gain Capital is the latest international broker to gain membership as a regulated entity offering FX trading to Canadian investors. Forex Magnates was the first to report Gain Capital’s approval under the Investment Industry Regulatory Organization of Canada in May 2012. Gain Capital has officially started marketing locally to Canadian investors from its Toronto office where it has 5 staff members who are registered with the Securities Administration of Canada.
Canada, the world’s eleventh largest economy and a member of the G8, is traditionally a commodities based economy. Among mining, oil exploration in the Canadian oil sands is one of its leading products. Canada is the world largest net energy exporter.
Japan’s GMO Click Securities and DMM Go Shopping Acquiring FX Prime and Gaitame Japan Respectively
Japanese Forex firms remain active in M&A, as the country’s two largest FX companies by volume announced aquistitions. GMO Click Securities (the top global broker by trading volume in Forex Magnates Q2 report) made a tender offer for FX Prime Corporation.
FX Prime is a Jasdaq listed company who has been offering Forex trading services since 2003. GMO Click is offering JPY 410/share which is a 110% premium to FX Prime’s July 31st closing price. The deal values FX Prime at approximately JPY 3.3 billion ($42 million).
Mr. Kousuke from GMO Click’s Corporate Strategy team guided Forex Magnates to its official disclosure of the tender. There, GMO Click stated that it expects to reach synergies with the deal and that the FX Prime unit would see reduced transactional cost fees by combining with GMO’s trading systems. GMO’s ability to provide industry leading spreads and low cost trading was emphasized in an interview with GMO Click’s CEO Hideyuki Takashima last month. Takashima explained that “As half of our employees are system engineers, we have focused on our system development,” which has allowed them to offer reducing trading spreads. GMO Click expects the deal to be accretive and simultaneously revised its 2012 earnings forecast higher.
EBS Unveils New Platform Changes
EBS, ICAP’s market-leading electronic FX platform, announces system and policy changes following extensive consultation with its customers on both the buy and the sell side. The changes, which follow the publication of EBS’s new dealing rules on 10 July, are designed to strengthen the resilience and improve the trading environment in the FX market.
The key updates are:
- Price granularity: moving to half pips and full pips in a selection of core pairs
- Revised quote and hit fill ratio targets to be set on a pair by pair basis
- New approach for enforcement of fill ratio policies, including cancellation of financial surcharges for non-compliance
- New quoting guidelines for Asia trading hours
New Low Latency FX ECN Launches in London
Parabellum Markets, a London based boutique ECN eFX brokerage announces the launch of a new Electronic FX offering. The ECN initiative connects LPs and traders in a low latency environment using Parbellum’s eFX trading platform. Trades are settled through CLS banks and BNP, thus limiting counter-party risk. Nathan Halfon, Managing Partner of Parabellum Markets said ‘We aim to offer clients the foremost platform with which to trade foreign currencies. With our extensive experience in the eFx sector, we have developed a platform which enables businesses to operate at an increased level of efficiency, decreasing the risks of slippage when trading. Additionally, the partnerships we have created with Tier 1 banks enable counterparties to trade at the market prices, without the need to use a market maker.’
MB Trading folds UK office
MB Trading announces to account holders of its UK subsidiary that it’ll be moving them to the US subsidiary. MB Trading opened the UK office during a wave of US brokers expanding into additional countries was at its peak – the idea was to move all non US clients to foreign subsidiaries where higher leverage and more flexible conditions could be offered. However, as the UK office it was forced to close as volumes in 2012 declined When contacted by Forex Magnates MB Trading CEO Ross Ditlove had this to say: “Our UK operations were designed to offer global customers certain features that we could not offer in the US due to regulatory changes, such as 100:1 leverage. As global Forex volumes have dropped, we have discovered that the demand for those features is not as great as we had anticipated. Our US-based operations are outpacing our UK operations by a significant amount in terms of accounts and trading.”
traFXpure Starts Founder Testing and Adds Three More Supporting Banks
Interdealer Tradition announced that it has added three more banks to its existing group of firms that have signed up to support its traFXpure initiate. SEB, Standard Chartered, and State Street join founding banks Barclays, Deutsche Bank, BNP Paribas, RBC, UBS, and Morgan Stanley. In addition, Tradition announced that it has begun testing of the new FX trading platform with select software vendors, as it prepares for its early 2013 launch.
MetaQuotes Introduces Trading Signals to MetaTrader 4
Following on its launch of Trading Signals for its MT5 trading platform, MetaQuotes announced the feature will be expanded to its MT4 product. The new feature is Metaquotes arrival into the crowded copy trader market where traders can choose to follow other trader’s in the Metatrader network.
Newedge Enhances FXPB Platform
Newedge, a global leader in multi-asset brokerage and clearing, announced the launch of a new Foreign Exchange (FX) Prime Brokerage (PB) platform. While forex has been a part of the company’s robust suite of prime brokerage services for institutional clients, the enhanced version provides institutional clients with greater access to the FX markets with a significantly expanded list of connections and updated infrastructure to support the processing of trades for managers and investors across multiple accounts and clearing brokers.
“Newedge’s FX offering, coupled with our wider capabilities as a leading prime broker and global futures commission merchant (FCM), provides hedge fund managers and institutional investors with the most efficient platform to support their FX and multi-asset business,” said Jasper Chua, Associate Director, Origination & Structuring at Newedge.
Saxo Bank Prepares for Tough Times Ahead – Lets Go of 250 Employees
During the same time that public brokers posted poor year over year figures in November, privately owned Saxo Bank was having its own problems. Reacting to overall weakness in the industry, Saxo Bank let go of 250 employees, mostly in its Copenhagen headquarters. Based on Saxo’s employee figures in its H1 2012 release, the layoffs amounts to around 15% of the broker’s workforce.
Japan’s FSA Reviews the Binary Options Market, Freezes New Activities
In a move to regulate the rapidly growing Binary Option market, Japan’s Financial Futures Association (FSA) informed brokers that it is restricting new products or technology from entering the market until a ruling is established. In a boon for existing brands and offerings, the FSA is allowing companies that are presently marketing to continue their operations. Areas being analyzed by the FSA include providing investment knowledge for clients, restraints for excessive trading, effective hedging functions, and relevant trading terms and conditions.
NFA Goes After Forex Brokers who Downgraded Their RFED License – Asks to Increase the Capital Back to $20m
Moving against firms that have downgraded their FCM status to RFED’s to decrease their capital requirements from $20 million to $1 million, the NFA proposed an amendment to increase RFED requirements to $20 million. If passed, the new law would have immediate ramifications on Easy Forex, Forex Club and Advanced Markets, each of who downgraded their status and could lead them to completely exit from the US.
Admiral Markets Launched ‘Supreme’ Meta Trader 4
Admiral Markets became the latest broker to begin offering an upgraded version of MetaTrader 4 as they announced the launch of MT4 Supreme Edition. New features include one click trading, a pip calculator, social media updates, a multi currency trading terminal, and market depth tool. Admiral has also added a marketing component to the platform as clients will be able to access education products directly from the platform as well as receive promotions from the broker.
Spotware Partners With CitiFX to Offer Liquidity Through its cTrader and cAlgo Platforms
Technology provider Spotware Systems and CitiFX announced that Citi’s liquidity through its TradeStream platform has been integrated within the cTrader and cAlgo products. The news provides brokers offering the cTrader system further liquidity sources for the ECN only trading platform. For CitiFX, the partnership follows a similar announcement earlier this year with Metaquotes and advances their presence in the servicing of retail brokers.
For Spotware, the news is another announcement in a busy year for the technology provider as it has boosted the number of firms offering its products, integrated liquidity feeds from numerous sources, and upgraded the efficiency of its platform.
FXdirekt Bank Shut Down By BaFin
German financial regulator BaFin released a moratorium to suspend business at broker FXdirekt Bank. The broker had been part of an expose story in October by business portal Wirtschafts Woche which interviewed customers and existing and former clients. According to the story, FXdirekt had basically fine-tuned the activity of scamming clients. This included the usual aggressive marketing and claims of large profits but also several other methods. One of them was the use of delayed feed for its demo platform where sales people who were watching the real prices would be on the phone with prospective clients and walk them through winning trades knowing in advance where the market was headed. At the time of the expose story, Forex Magnates had also reported that the BaFin was investigating the broker.
Presently, BaFin had determined that following a period of operating losses during 2012, FXdirekt Bank no longer had adequate capital to continue operating. As a result, the regulators put the broker into liquidation mode and ordered the company to cease operations. On its home page, FXdirekt has posted the directive from the BaFin. According to the BaFin press release, as of December 18th, the broker had total assets of €37.4 million with €17.2 million in customer funds and had 3200 active traders.
Leverate to Open Hong Kong Office
Forex and CFD broker solutions provider Leverate announced during mid December that it will be opening a Hong Kong office in January 2013. The new office is targeted with increasing Leverate’s penetration in Asia. According to Leverate, with one third of global traders located in Asia, the region is expected to be a driver of growth for the company. The Hong Kong office will be managed by Arthur Le, formerly of FXCM and most recently at Forextrading.com, a Saxo Bank subsidiary. Saxo Bank, is also a minority stake owner in Leverate. The expansion, is part of a larger trend by financial firms opening offices in Hong Kong as a gateway to the rest of Asia, and specifically China.
IntercontinentalExchange Makes Bid For NYSE Euronext, FX Could Benefit
The IntercontinentalExchange announced that it had made a formal bid for NYSE Euronext for $33.12/share, a 37% premium over its previous closing price. The At $33.12/share, the NYSE Euronext is valued at $8.2 billion. NYSE Euronext shareholders will own approximately 36% of the combined company. The ICE expects to see $450 million in run-rate synergies and reach 15% earnings accretion. In a separate release, the ICE also released that it has entered into a Clearing Agreement with the NYSE Euronext for its Liffe Derivatives unit.
Taking a look at the deal from the FX angle, the combined exchanges could become important players in the currency space in the future. While neither exchange has a strong FX trading franchise, the ICE is really just a ‘one trick pony’ with its Dollar Index contracts, and the NYSE Euronext’s currency exposure is limited to the Liffe’s EURUSD contracts. Nonetheless, for the ICE, the merger with the NYSE represents an opportunity for them to increase their product base, and create a larger multi asset platform which should also benefit the combined company’s currency futures.
GFT Throws a Bomb – Pulls Out Of The US Forex Market
In a stunning move, broker GFT announced that it was pulling out of the US and Japanese markets. After an initial announcement that it was selling it was moving its US Retail business to TD Ameritrade, that deal was later nixed and assets were being moved to GAIN Capital. In addition, GFT announced that its Japanese business was being taken over by Planex. While GFT had been struggling during 2012 and had experienced a round of job cuts, the exit from the US was reportedly based on a regulatory changes, According to insiders, GFT had pooled customer assets from various global subsidiaries in one account. Although the practice was done for years, the NFA decided that it was going to curtail the accounting policy and required GFT to create separate accounts for each jurisdiction. Given a 48 hour ultimatum which GFT didn’t believe it could meet, the broker defensively announced that it was leaving the US rather than have the NFA publically shut them down.
LMAX Gets Sold To Management, Valued at £3.6 Million
Following rumors that gambling concern Betfair would be shedding its non-gaming units to focus on its core business, it was announced that 67% ofLMAX Exchange was being sold to its management for £2.4 Million. The deal excludes the Tradefair division. Commenting on the deal, LMAX Exchange CEO David Mercer stated “LMAX Exchange has clearly benefited from being part of the Betfair group. However, our new status as an employee-owned company gives the business the required flexibility to rapidly grow and evolve. We have a clear strategy and roadmap to build LMAX Exchange into a leading FX venue globally in three to five years.”