12 Years of IPO Promises. Why FX Brokers Do Not Go Public

2021 was a record year in terms of market activity. The global initial public offering (IPO) reached a record high last year, benefiting from the momentum achieved in the second half of 2020. A total of 3,022 new listings took place globally, with companies raising $601.2 billion. As in previous years, it is hard to find any contracts for difference (CFDs) and Forex (FX) retail brokers in this group. In the past, attempts to go public often ended with just mere promises.

CFD Brokers Do Not Want (or Cannot) to Go Public. The List of Public Companies Is Rather Short

In the third quarter of 2020, social trading platform eToro announced that it wanted to go public via a SPAC deal. We are still waiting for the transaction to be finalized, thus, the really narrow list of publicly traded brokerage companies has not changed at all since 2016, when XTB debuted on the Warsaw Stock Exchange.

Apart from IG Group, Plus500, CMC Markets, Interactive Brokers, Swissquote, Admirals and above mentioned XTB are listed brokers, the rest of the biggest brokers are not publicly listed. But, it does not mean that nothing is happening. Over the last two years, we have seen more private financings and acquisitions. Also, the coronavirus pandemic has caused heavy consolidation. The big players are becoming even bigger, and small brokers struggle to enter the market, especially in Europe and the United States.

According to Andrew Saks, the Head of Media & Analysis at ETX Capital, there could be two reasons for the small numbers of exchange-listed FX brokers: "It is impossible to go public if a broker hosts its client base on third party servers and given that around 85% of the brokers in the retail market do that, this is a large barrier."

In contrast, others do not want to share their financial details. "For example, in the United States, publicly listed firms have to state in their quarterly and annual reports how they conduct their business, whether they use an A book or B book method, and the internal handling of order flow may not be something many firms want to disclose publicly," Saks added.

Many IPOs Were Announced but the Majority Were Not Conducted

What do AvaTrade, ThinkMarkets, FxPro and Fxall have in common? All of these brokers have been trying to go public over the past few years. However, these plans have either been completely put on hold or no new information has emerged since the first revelations.
Brokers are relying on private financing and M&As instead of exchanges, which are far more popular in the industry. For example, ThinkMarkets closed a $40 million funding round in February this year. The investment came from Mars Growth, a joint venture fund of Liquidity Group and MUFG. In 2018, even a more sizeable sum was raised by the global social trading and investment platform, eToro.
According to experts interviewed by Finance Magnates, the FX/CFD market is no longer the ‘Wild West’ of trading, but a fully saturated and consolidated industry. It is not hard to resist the impression that this has caused some stagnation.

For more on IPOs, the current state of the market, acquisitions and takeovers, read the latest Quarterly Intelligence Report by Finance Magnates Intelligence.