FXCM Reduces Its Credit Facility to $150 Million - Cites Strong Balance Sheet

During a hostile period in the global financial markets with record low volatility, one of the world’s largest currency brokers has reported positive metrics. Despite the broker, and the wider industry suffering in reduced trading volumes, the broker has reduced its credit facility. The broker also reported that its acquisition of FXDD’s US entity was purchased for the reasonable amount of $4.4 million.

After reporting organic growth in the amount of client money the broker holds in the July monthly metrics, FXCM continued to report positive news with the reduction of its Credit Facility. The firm entered the facility in 2011, a combination of credit and the firm’s own money have been behind the numerous acquisitions the firm has made in the retail and institutional sectors.

FXCM has lowered the credit amount from $205 million to $150 million. In its filing it stated : “On August 7, 2014, the Company entered into an amendment to the Credit Agreement by and among Holdings, LLC, Bank of America, N.A., as administrative agent and certain lenders from time to time parties thereto. The amendment reduces the maximum borrowing to $150.0 million, and modifies certain terms of the Credit Agreement.”

The leading multi-asset broker has lowered the facility as it has a strong and healthy balance sheet, as of June 30, 2014, FXCM had cash and cash equivalents of $348.8 million. Furthermore, with a reduced credit amount the broker will minimise fees and interest Payments . A spokesperson at the firm commented to Forex Magnates: “At the time we brought down the credit facility to $150 million which will save us on commitment fees.”

Details of FXDD Acquisition

In the report FXCM also commented about its acquisition of FXDD’s US operation, as reported exclusively by Forex Magnates on the 28th of April, that FXDD was believed to be in discussions with firms on a possible takeover, final figures relating to the acquisition were revealed. In addition, FXCM clarified a previous figure it had reported in reference to the number of accounts and client money it accepted from FXDD’s client base.

The firm states: “During the quarter, we acquired 6,172 active accounts with $23.4 million in client equity from FXDirectDealer LL. The firm saw overall costs and expenses reduce primarily due to lower commission paid to referring brokers, however it mentions that an increase of $0.3 million in prime brokerage fees occured along with $0.5 million in higher amortization expense which was primarily related to capitalized software and amortization of intangibles related to the acquisition of accounts from FXDD.”

The current climate of lower volumes and revenues shows that the once thriving FX industry is feeling a shake-up, FXCM’s size, experience and ability to operate in tough conditions begs the question of, how are smaller brokers operating in these conditions?

FXCM is expanding beyond the core FX offering through its diverse CFD offering, revealed in the second quarter review. The firm plans to compete with its direct competitors that offer vast trading instruments, it saw CFD volumes increase 5% QoQ. The firm is planning to launch CFDs in a true agency offering, a game changer in the fragmented CFD market.