FCA-regulated Forex Capital Markets Limited (FXCM), the brokerage owned by Jefferies Financial (NYSE: JEF), published its annual financials, ending on December 31, 2020, reporting a net profit of almost $4.9 million. This is significant as the company turned a loss of more than $1.2 million in 2019, meaning there was a 518.8 percent year-over-year gain.
Additionally, the Companies House filing detailed that the turnover of the company for the period came in at $15.46 million, which is 7.5 percent lower than the previous year.
FXCM offers foreign exchange (forex) and contracts for differences (CFDs) trading services to both retail and professional clients. It is aggressively expanding its offerings and added social and copy trading services earlier this year.
A Better Revenue Model
The massive profits came after the broker simplified its revenue model at the beginning of 2020. The filing outlined that the company ‘hedges its clients trade with affiliates and is compensated in return with a straightforward commission based upon a relative contribution to total FXCM group profits’. Further, it earns from its white-label offerings, back-office and trade execution services, FX market prices and other ancillary services.
Moreover, FXCM gained from the market volatility in 2020 that pushed the trading volumes much higher. It gained 11 percent year-over-year, averaging at $50 billion in volume per month.
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In addition, the profits were the result of the reduction of the broker’s administrative expense by 36 percent. Its brokerage business generated an operating profit of almost $4.4 million.
However, the client cash held by the broker dropped by 24.9 percent to $174.5 million by the end of the year. FXCM highlighted that the dip was caused mostly by the withdrawals of some high-value clients.
Now, FXCM is focusing on retaining and growing its client base in 2021. “The company’s objectives for 2021 are to optimize revenues from the current and new businesses while strengthening the FXCM group brand,” the broker noted.
“The Company is also re-evaluating how client trade flows are managed, relying less on a smaller number of metrics and more on technologies which provide a holistic view into client trading pattern.”