Rakuten Securities Posts 75% Revenue Decline as Low Volatility Bites

With the FX market stuck in the doldrums, several brokers performed badly in Q1 of this year

Japanese retail broker Rakuten Securities released its financial report for the first quarter of 2019 this Wednesday.

The firm – a subsidiary of e-commerce giant Rakuten – saw an almost mind-boggling decline in revenues compared to last year.

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According to documents released by the broker, operating revenue for the first three months of the year was 14.4 billion yen ($128.6 million).

For the same period last year, the equivalent figure was 55.9 billion yen ($500 million).

That means the firm saw, from a year-on-year perspective, an almost 75 percent decline in its operating revenues for the first quarter of this year.

Things weren’t much better after expenses had been paid off.

This year, the firm had an operating income of 3.3 billion yen ($29.5 million) for the first quarter.

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Last year, Rakuten Securities reported a first-quarter operating income of 20.6 billion yen ($184.2 million), meaning this year’s figure was almost 85 percent lower than in 2018.

Stuck with low volatility

Net income was similarly bad, with the firm reporting a figure of 1.9 billion yen ($17 million) for this year’s first quarter.

That was a whopping 86 percent decrease on last year’s 13.1 billion yen ($117.1 million).

The leading cause of this decline appears to have been low volatility in the foreign exchange markets.

Most Rakuten Securities traders try to make money in the FX market, though the company does offer trading in other asset classes.

And those markets have been completely dead over the past few months. With volatility so low, trading volumes – and hence revenues – have declined across the retail trading brokerage industry.

Thus, though Rakuten Securities has been hit particularly badly by the markets, it’s by no means alone in its current predicament.

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