GAIN Capital First to Report August Trading Volumes

The impact of the new ESMA regulations leads to a sharp year-on-year decline.

If the first half of 2018 has been stellar for retail brokers, the challenges for the industry are just starting. GAIN Capital, which owns two retail brokerage brands, City Index and Forex.com, has just announced its trading volumes for August.

The firm is reporting average daily trading volumes that declined 26.2 percent when compared to last year. The number stands at $7.6 billion daily, which is also lower by 8.4 percent when compared to July.

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Overall, the impact on trading volumes is not conclusive. While there is no doubt that the decline is a consequence of the new regulations, August is typically a slow month for brokers.

Summer vacations could be distorting data and conclusive statements on the impact of the new ESMA regulations would be premature. Still, the comparison on a year-on-year basis is the crucial one to monitor.

GAIN Capital’s brands yielded a total of $174.6 billion in trading volumes in August. The number was lower by 26.5 percent when compared to last year and by 4.2 percent when compared to July.

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Industry Eagerly Awaits Numbers

As the new ESMA regulatory framework kicks in, brokers are eagerly awaiting the publication of stats for August. The month of vacations, especially in Europe, is not the significant barometer we are all looking for.

Emphasising that the state of the industry can not be reassessed based on one month’s worth of data, we can still analyse a bit. GAIN Capital’s metrics show us that some moves undertaken by brokers in recent months might have yielded results.

One such move is the ‘professionalisation’ of the industry, as explained by my colleague David Kimberley. Brokers have been largely successful in their effort to reclassify a number of their clients to ‘professional’.

Another key point is that while retail traders rake in less volumes, they keep misplacing risk. We have pointed out on numerous occasions that the 25:1 leverage cap in Japan didn’t stop the country’s traders from forming the largest market on the globe.

Once again, one month of data is still nothing and we will be eagerly awaiting the follow up month of September for further clues.

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