OptionsXpress to enter the retail forex market

WSJ Reports: OptionsXpress Holdings Inc. (OXPS) is developing a new currency-trading offering that will give the derivatives-focused online brokerage an entry

WSJ ReportsOptionsXpress Holdings Inc. (OXPS) is developing a new currency-trading offering that will give the derivatives-focused online brokerage an entry point to the $313 billion per day retail foreign exchange market. The move makes the Chicago-based firm the latest major retail broker to tap investors’ growing thirst for forex, and factored into Charles Schwab Corp.’s (SCHW) agreement last month to acquire OptionsXpress for $1 billion in stock. “We looked at our mission, looked at the growth in this market and said ‘we’ve got to be involved in this market,'” said Dan O’Neil, OptionsXpress’ executive vice president for futures, who is heading the buildup. OptionsXpress’ work on forex caught the eye of Schwab as the two companies put together the $1 billion deal for OptionsXpress. Schwab Chief Executive Walt Bettinger noted “rapid-growing interest” in currencies among his company’s clientele on a late-March conference call discussing the deal, which is expected to close in the third quarter.”

We see a flurry of activity in this space now as the maturing market attracts both the existing major non-forex brokers such as TradeStation and OptionsXpress and their clients who only now begin to discover this ‘new’ asset class. This I suspect will be the next major growth driver in the US forex market. Overall forex volumes in the US haven’t grown as much as they grew elsewhere and this new wave of interest may reignite this once highly growing market segment in the US online trading market. TD Ameritrade through its acquired thinkorswim division is already offering forex, so do MF Global and Interactive Brokers. However these brokers weren’t really focused on their currency trading clients as these used to be marginal portions of their overall clients base and typically currency trading accounts are smaller. From traders perspective these brokers weren’t attractive for same reason as well – they weren’t focused on retail forex traders, didn’t give them the proper attention (educational courses for instance) and didn’t provide enough forex liquidity or proper software (only MF provides MT4). It seems all this is about to change.

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