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Brokers Look Past SNB Crisis But Are They Ready for Another Black Swan?

Who is set to acquire an Israeli FX license and which U.S.-based broker has the most profitable traders - All

This week stories of top FX brokers such as FXCM, InteractiveBrokers and Plus500 made the most impact on our readers. An exclusive report showed that the U.S. market is growing despite the fact that some American brokers took the hardest hit on Black Thursday. And with the help of forex insiders, we examined the industry’s ability to survive another round of extreme volatility.

More Accounts, More Profits

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This week we released our exclusive U.S. Q1 2015 Forex Profitability Report, showing that more people in America traded and were more profitable than in Q4 2014, with Interactive Brokers coming in on top.

Results from reporting brokers showed that the U.S. forex market grew by 3,938 or 4.3% to 96,112 active accounts traded during the quarter. Profitability also improved, with weighted averages revealing that 36.4% of US customers were in the black during Q1, compared to 36.2% in Q4 2014.

Non-weighted averages that that don’t take a broker’s account numbers into consideration and count individual firms equally, showed that profitability for the average U.S. broker decreased by to 34.2% compared to 34.8% in Q4 2014.

Interactive Brokers Marches on

On Thursday, Interactive Brokers Group, Inc. (NASDAQ: IBKR) announced it entered into a definitive agreement to acquire online investing marketplace, Covestor.

With $121 million in losses, Interactive Brokers now eyes the prime brokerage space

The story was first revealed on Wednesday as initial details of the acquisition were covered in Finance Magnates review of Interactive Brokers post-earnings statement conference call and their explanation how Covestor’s services form part of an overall focus to provide customers with new products.

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Our review also showed that Interactive Brokers may have taken a $121 million FX hit from the Swiss franc crisis, but they are looking at copy trading and the prime brokerage businesses as avenues for growth.

FXCM Gets Creative

On Tuesday it was revealed that on April 15, FXCM, Inc. (NYSE: FXCM) entered into an option agreement, issuing an option to purchase 569,344 shares of the brokerage’s Class A Common Stock for a purchase price of $550,000.

The move by FXCM is part of a negative equity balance settlement with a customer of the brokerage. After suffering substantial losses in the aftermath of the Swiss franc debacle on January 15, the company announced it will forgive 90% of negative balances. Now it seems the broker is resorting to creative ways to settle negative balances with the remaining 10%.

Ready for Grexit?

According to the latest indirect communication between Greek and German finance ministers Yanis Varoufakis and Wolfgang Schaeuble, the likelihood of a Greek exit from the Eurozone is increasing.

Seeing the lingering presence of Black Thursday, can the possibility of Greece exiting the Eurozone can impact the foreign exchange industry as strongly as the Swiss National Bank move in January? Or will it be more of a Lehman type event, which gently increased spreads for a couple of months?

A number of industry insiders offered their take on the matter.

Targeting Israel

Last Sunday, we revealed that the new regulations coming into effect in June in Israel have sparked the interest of local and international companies alike. Up to fifteen brokers are said to be trying for a license to operate in the country, and there are already nine applications in process aiming to reach the end of May deadline.

A number of the applicants are highly established FCA regulated, ASIC regulated or CySec regulated brokers and liquidity providers, who wish to cater to Israeli clients and IB’s. Starting in June they will not have a legal option without the appropriate license. Some of the most interesting players rumored to set their sights on an Israeli license are Plus500 and LMAX Exchange.

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