Retail forex volumes survey September 2010

It's time for a new retail Forex

Forex Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Foreign exchange or forex is the act of converting one nation’s currency into another nation’s currency (that possesses a different currency); for example, the converting of British Pounds into US Dollars, and vice versa. The exchange of currencies can be done over a physical counter, such as at a Bureau de Change, or over the internet via broker platforms, where currency speculation takes place, known as forex trading.The foreign exchange market, by its very nature, is the world’s largest tradi Read this Term brokers volume survey, last one was in January and many things changed since.

Most notably, several brokers filed for an IPO and had to publicly disclose their trading volumes. This allows us to see that both FXCM and Gain may have somewhat exaggerated their numbers in previous press releases. A year or so ago FXCM was claiming $500 billion a month, then it was decreased to $365 due to some change in calculation methods and now we can see that FXCM's volume is only $261 billion a month. Same story with Gain: it was claiming $200 billion a month whereas its IPO documents show only $100 billion. Accordingly I have made slight adjustments to rest of brokers.

Another explanation for the big drop in reported volumes is the CFTC's fight against Leverage

Leverage In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders In financial trading, leverage is a loan supplied by a broker, which facilitates a trader in being able to control a relatively large amount of money with a significantly lesser initial investment. Leverage therefore allows traders to make a much greater return on investment compared to trading without any leverage. Traders seek to make a profit from movements in financial markets, such as stocks and currencies.Trading without any leverage would greatly diminish the potential rewards, so traders Read this Term which forced US brokers to reduce leverage from 1:200 to 1:50 on majors and 1:20 on minors in less than a year.

For the first time I'm also including here my own estimates for several brokers who never publicly disclosed their numbers.

* numbers do not differentiate between purely retail and institutional volume as it's next to impossible, even for brokers themselves, to know that.

** numbers do not include Japanese brokers.

If I was to guesstimate the total worldwide size of the purely retail forex market (by retail I only mean private professional and unprofessional traders) I would take 30% off the total volume number in this survey (removing what I estimate to be the institutional part) and multiply it by 2 (to include the Japanese market which is huge by itself, even after the aggressive volume reductions there) and will calculate that it equals to more or less $165 billion daily volume.