It’s been a while since we last published a Monthly Forex Review post, but the column is officially coming back. Although we have hit the summer season, as well as the World Cup taking up a portion of the month, this didn’t lead to a reduction of headlines, as July had its share of product launches, regulatory stories and M&A.
2014 has been marked by a period of depressed trading activity as FX volatility of major currencies has declined to 25-year lows. Specifically, April and May were months to forget as across the board brokers and trading venues reported declines in volumes. However, as reported throughout July, June volumes rebounded with trading venues such as EBS, KCG Hotspot, Thomson Reuters and the CME all showing gains in their trading. Leading the way was FXall, where average daily volumes of its combined ECN and relationship-based trading hit an all-time high of $141 billion. Also reporting gains was CLS Bank, where the average daily volumes of trades sent for settlement was $5.46 trillion, 13% above May’s figures. On the whole, the outperformance from CLS Bank and FXall revealed that demand for direct relationships with primary dealers remains strong. The trend is bullish for the fortunes of FX aggregation technology providers but could signal more difficulties for ECNs.
Among brokers, activity didn’t rise in parallel with institutional venues. Reporting weaker volumes during June was GAIN Capital, FXCM, Saxo Bank, as well as Russian brokers. The overall weak results for the quarter caused both IG Markets and Plus500 to attribute revenue shortfalls on the drop in trading.
Perhaps not the most important release from global regulators, but definitely the most interesting, was a warning about ‘hot investment trends’ from the Ontario Securities Commission (OSC). The OSC has been one of the more aggressive regulators during 2014 in regards to warnings about Forex and binary options brokers who are marketing in their jurisdiction without proper licensing. Following on their individual naming of brokers, the OSC issued an overall warning to investors about being scammed or taking on too much risk when getting involved in hot trends. Among the three examples, not surprisingly, Forex and binary options were included in the OSC warning of investments having high risks. Also included was a warning about Marijuana investments. Due to the medicinal marijuana legislature being passed in Canada in April, it has apparently spawned a wave of marketers promoting investments in the sector. However, as seen by an early entrant aiming to tap this field but soon exited, marijuana investing comes with its own set of risks.
Elsewhere, during July the Japan FSA updated its list of foreign brokers marketing in Japan without a license. Added to a long list which already includes EU regulated brokers such as eToro, FXPro and Instaforex were primarily binary options firms, including OptionBit, Option99 and Opteck.
Also during the quarter, the recently formed Financial Commission announced that they would be randomly publishing cases between brokers and customers. In addition, the commission certified its first binary options trading provider, BinaryStation.
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After several months of speculation and bids, it was announced during July that ForexWare had purchased Boston Technologies. The combined firms are expected to merge their business and sales funnel to offer technology solutions to brokers as well as liquidity. Following the news of a sale being finalized, it was shortly reported afterwards that staff reductions are expected to take place at Boston Technologies.
Also during July, London Capital Group (LCG) announced a proposal of financing by GLIO Holdings. The offer was met with a competing bid from Spreadex for a complete purchase of the company. Ultimately, shareholders voted in favor of financing from GLIO, which although is dilutive and led LCG’s share price lower, provides a turnaround opportunity as a standalone company.
In another deal during July, BVI regulated Gallant Capital Markets announced to Forex Magnates that it was being acquired by WSM Invest for a purchase price that could reach $14.5 million if certain performance metrics are met. Holding multiple licenses in Europe and Asia, the deal will provide regulatory synergy allowing Gallant to market its STP FX offering to more jurisdictions. Elsewhere, SEC filings revealed that GAIN Capital made patent and software acquisitions from Valaquenta and Forexster through its indirect subsidiary, GTX Bermuda.
New Products and Updates During July
FIX Trading Adds FX Support on Its Trading Enablement Standard Initiative (TESI) – Being supported by TESI provides a standard messaging system for clients and dealers for execution and distribution of pricing. As more volumes are being transacted directly with banks via single-dealer platforms, it has led to an increased need for industry-wide standards in handling multiple client and broker connectivity and liquidity dissemination.
OANDA was busy during July as they launched their latest iPad fxTrade 4.0 app. In addition, following a beta test of the model last year, OANDA announced that it would be welcoming introducing brokers. The news follows years of OANDA being against using a partnership-based model within its business.
IG Opens API to Public Development, Launches IG Labs – Creating IG Labs, IG launched a web-based public API and community portat for developers to create apps to trade with the broker.
ChartIQ Releases Android App – After focusing initially on iOS and Windows 8 users, ChartIQ launched its charting package for Android users.
d:code:it Takes Visual Pricing Analysis to the Extreme with MarketStak – Not a commercial product yet, but launched to the public domain for free use is MarketStak. The app provides visual pricing analysis of Forex pairs using some of the most updated methods in web development.