OANDA US Client Profitability Q4 Decline, Technology or Macro Driven? Executive Response

Earlier this week, Forex Magnates published the US retail forex account profitability report for Q4 2013. Among the noticeable trends was a decline in overall weighted profitability during the quarter even as volatility was minimal. In the report we highlighted that account profitability at OANDA had fallen to 32.5% from over 40% the previous year. The decline led us to speculate that the broker’s decision to change its pricing from fixed to dynamic spreads may be at fault. The change of pricing has been a hot topic among many customers who have questioned whether it has led to inferior executions.

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Speaking about the topic, Courtney Gibson, Vice President of Trading at OANDA, spoke to Forex Magnates to provide his company’s opinion of the matter. Overall, Gibson stated that their data continues to back up that executions have improved since initiating dynamic spreads and that they are seeing a near equal distribution of orders being filled with positive slippage compared to negative. He added though, that the broker is aware of customer complaints about slippage, but that they believe much of that is due to confusion in regards to stop losses. Gibson explained that “stop losses always get filled at the first price after the market crosses the stop loss price.” As a result, slippage on stop losses will predominantly be negative compared to that of take profit orders.

Explaining the drop in profitability for US customers, Gibson stated that OANDA believes it is more a result of the macroeconomic situation taking place in 2013 than technology- driven. Specifically, he mentioned that US clients had a difficult time speculating on potential Fed tapering and found themselves short the euro as the price moved higher, the EURUSD rallied during much of the year. Gibson compared results to other broker’s US customers which showed similar declines in 2013 profitability. In addition, Gibson added that their data from other regions that had less customer exposure to Fed tapering speculation performed better. Specifically, he mentioned that Canadian clients experienced profitability figures of around 40% while Japanese accounts performed at 48%.

In regards to the overall contraction in US account numbers, Gibson believed “that the decline is industry wide.” He added though that this trend has been US specific, with their overall global client numbers growing.