It’s that time of the year when countless media outlets offer their predictions for the coming year. At Forex Magnates we also wanted to share our thoughts of where we see the market headed. (Ideally, all our readers will subscribe to our Quarterly Report to get our in-depth analysis to trends taking places – hint, hint :))
Before I move onto my own ideas. These are Michael Greenberg’s predictions for the coming year:
- Mobile trading usage to keep rising – percentage of mobile trading volume will increase, more advanced mobile platforms will be introduced
- A few more brokers to exit US – few more US forex brokers will realize that they can’t operate where they aren’t wanted, thus leaving the market to just a handful of very large forex brokers
- Exchange traded FX to grow – LMAX, ICE, CME, DGCX, ICDX, MICEX and others will see their volumes grow substantially, however will not be able to provide a real altnernative to broker market making
- More trading platforms to hit the market, and thereby collectively taking away some market share from Metatrader platforms, MQ however will continue to dominate the market in the forseeable future
- Binary Options sector keeps getting larger with more and more larger players enter the market, more platforms, especially broker-developed ones will appear
- More consolidation takes place in Europe and Japan, however many more small and niche brokers will continue entering the market
Personally, other than the comment about exchange traded FX to grow, which I see at least in the US stalling, I’ll agree with these ideas. In no order, these are my 6 predictions for the year:
Someone is going to create a Mobile first broker. In the similar way that Amazon is selling its Kindles at cost to promote usage of its online store, a broker will produce a trading experience that targets first the mobile user with the desktop trading platform the secondary, ‘add-on’ environment. They might even steal the playbook from Amazon and give away tablets preloaded with their platforms (I am really bullish on this idea, so if this light’s a fire for anyone, let’s talk)
Tier 2 & 3 banks become bigger players in retail FX. Thanks to implementation costs dropping from the likes of TraderTools, Integral, and Caplin Trading Systems, it’s getting easier for traditional banks to start offering forex trading to their clients. In a sneak peak to our Q4 report we highlight how Polish banks are becoming more involved with the retail FX market. As such, having an existing client base and sales staff and access to cheap white label solutions puts many smaller banks in position to be big players in the $10,000 and up market of forex traders.
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Big data becomes the industry trend. Having the ability to analyze and react to data in real time is quickly becoming a reality within the industry. Brokers and banks using CEP and other similar technology are able to dynamically adjust their spreads and apply risk management processes. The result are higher trading profits from normal trading and the ability to identify toxic order flow quickly. As such, companies using such technology will be able to undercut their competitors in spreads, thus leading to the haves and have-nots. Firms behind on the ball will be forced to decide between not competing on spreads or sacrificing profit margins and lowering their pricing.
eToro makes a big splash. This past year we saw FXCM post several White Label partnerships with well known financial brokers. In a similar move, I am predicting that eToro partners with a large broker (most likely US based) that will start to offer its products. If you take a look at eToro’s US offering, you’ll notice they have moved to ILQ from FX Solutions. As ILQ doesn’t work directly with retail clients, such a move could allow eToro to have an easier time working with US brokers looking for an easy way to start marketing a social trading product.
Merger between two of the top ten firms. Regulations, downsizing, falling volumes, lack of innovation etc are all reasons a big merger makes sense. But, it won’t matter as it will be a disaster. As we have seen from previous deals, employees like to jump ship so the merger will ultimately be one broker plus an empty shell.
Volumes rise. The one thing I noticed from November was that volumes for Yen crosses went up like crazy and pretty much on their own carried the entire industry for the month. This was due to volatility returning to the Yen for a variety of reasons. That being said, the base has been put in place during 2012; volumes lower but clients and funds higher. Therefore, a little spike in volatility during 2013 will go a long way to boost volumes, and fast.
A few honorable mentions:
- A broker goes prop and opens a trading room for clients where they can sit and trade using the firms hardware. Sitting around with 50 other traders is social trading the way it’s meant to be.
- Metaquotes acquires a few third party developers
- Michael fires me for pitching startup ideas and venture capital solicitations on his website
Those are some of our ideas, let’s hear what our readers think in the comments!