I’m sure that when a book on retail Forex will be written a few years from now one of the biggest flops mentioned will be Saxo Bank.
Saxo Bank, as I have extensively covered and claimed in the past, should have become a leading Forex brokerage company a long time ago. Instead Saxo reached the top and then just stagnated for years and years without making any real progress. Saxo should have been much more aggressive by buying other brokers and establishing new subsidiaries years ago. However, I guess the executives were satisfied with their ostensibly leading position in the market and made little or no use of the large investment they received from a Portuguese bank.
Saxo Bank has finally woken up, but it might be too late. Saxo is chasing after FXCM‘s tail wherever it goes – first in Dubai then in Asia, AND losing ground in Western Europe which should have been its stronghold plain and simple.
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A few days ago Saxo announced the acquisition of a Japanese Forex broker and establishment of Forex service to Japanese clients. This move is nothing shy of a complete fiasco. It resembles the last minute move Alpari’s made, creating a US subsidiary. This move came few weeks or months before the new NFA requirements were announced which made it virtually impossible to operate a Forex brokerage in the US.
Alpari is surely sorry for the hasty step it made and Saxo will be sorry for its Japanese move sooner rather than later too.
First of all the Japanese market is already crowded with FXCM, Gain and IG Index controlling a pretty large portion of the market, but that’s not enough reason by itself. What’s making this move really disastrous is the new upcoming Japanese regulation which looks to reduce Forex leverage to 1:50 in the first step and then 1:25. Does this remind you of some other unbalanced regulator?
The limit on leverage in Japan is likely to cause the same reaction that NFA’s steps caused in the US: consolidation and exiting of little brokers. Right now, Saxo’s Japanese business is in its infancy, and will probably stay that way forcing Saxo Europe to move money from one full pocket to another one with a major hole in it…
Looks like Saxo made all the mistakes possible in this race and created more opportunities for its competitors than they could possible hope for currently. It remains to be seen how long will it take until Saxo realizes that the battle is lost and that the only smart thing it should do is focus on Europe – it’s own happy hunting grounds and try at least get a few market share points back in that territory.