Consolidation in the financial services sector continues with the announcement by GAIN Capital (GAIN) of a majority investment in two futures brokers. GAIN has taken a 55% stake in the two companies, Global Asset Advisors, LLC (GAA) and Top Third Ag Marketing LLC (Top Third), with call options to acquire the remaining stake at a future date. The move comes as GAIN looks to diversify its offerings into low risk, commission-based asset classes.
The strategic investment with GAA extends GAIN’s current relationship with one of its subordinate firms, Daniels Trading (Daniels), that operates under the GAA umbrella. Daniels currently functions as an introducing broker to GAIN. According to the introducer’s website it offers a range of solutions including automated futures trading as well as access to social trading portal, Currensee.
On the other hand, GAIN’s interest in Top Third raises questions as the firm operates as an intermediary in the agricultural options market, a new business venture for GAIN. “Today’s announcement marks the latest in a series of measured steps we are taking to expand our presence in the futures industry and to diversify our revenue through the growth of our commission businesses,” said GAIN Capital CEO, Glenn Stevens in a statement.
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The two firms will play a distinct role in GAIN’s expansion strategy, GAA serves as a complementary service to the firm’s existing exchange-traded business which constitutes 6% of total revenues according to GAIN in a company presentation. Additionally, the investment into Top Third opens up new avenues of growth for the firm. The current investment complements GAIN’s acquisition of Open E Cry, a futures broker in 2012.
Andy Daniels, CEO of GAA, commented about the investment: “We are excited to be partnering with GAIN. They have been very successful in building a global online retail trading business, offering customers industry-leading standards of service. Together, we believe we have an excellent opportunity to do the same for the retail futures industry. At the same time, the ownership structure allows us to continue to support our existing customers and partners as we have done for the last two decades.”
GAIN has seen significant growth in its exchange-traded solution during 2013. The firm saw a 18% rise in the number of clients’ accounts on a YoY basis, crossing the formidable 9,000 mark. In addition, clients’ assets were up 30% to $128 million from figures reported in 2012. The firm has reported that it is looking at new strategies to increase its offering, these include marketing efforts as well as enhancing its sales force to “attract institutional customers and partners,” according to a company presentation.
Throughout its fifteen year history, GAIN has been involved in a number of mergers and acquisitions which have compounded the firm’s growth. Its largest acquisition was of rival FX broker, GFT, which was acquired for $108 million. In 2013, GAIN reported a net revenue of $266 million.