Shares of FXCM were down nearly 11% yesterday after the broker announced that retail revenues per million dollars traded was lowered to around $70 from the $75-$80 range the broker had forecast to investors.
Shares of FXCM were on the decline yesterday following trader reaction to the broker’s after-the-close release of their operating metrics on Tuesday. Included with the December volume numbers was also Q4 guidance for their retail Forex trading division. Guidance of revenues per million dollars traded was lowered to around $70 from the $75-$80 range the broker had initially forecast to investors. Reacting to the news, shares of FXCM ultimately closed yesterday down 10.96% to $14.87 on an overall weak day for US stocks.
According to the broker, the revenue shortfall was based on lower margin Japanese yen instruments composing a greater percentage of overall volumes. Also being cited was a greater percentage of volumes originating from customers in regions where FXCM had launched its new lower pricing plan.
At the time of the pricing plan release, Forex Magnates speculated that FXCM would benefit from increased volumes in those markets, as reduced spreads have shown to directly correlate to higher customer activity. The question though was whether the increased volumes would mitigate the margin compression of these trades due to the lower pricing structure.
Initial performance has shown the reduced pricing structure to be accelerating volumes. According to FXCM, volumes in markets with the reduced pricing experienced quarter-over-quarter growth of 76%, compared to a 23% improvement in other markets and an overall increase of 40% for the broker. The more than tripling of growth in the low-spread regions related just how much reduced costs are correlated to volume increases. (One note is that Japan is included in the lower cost markets, with the country outperforming all regions in Q4. Therefore, the 76% growth may be vulnerable to a decline or smaller gains in Q1 2015.)
Despite the volume increase, retail revenues are set to underperform for Q4. Using FXCM’s estimates of $70 per million dollars traded, the broker is headed to achieve $95.62 million in retail trading revenues for Q4. This represents only an 8.9% increase from Q3 levels, despite overall volumes growing by 40%.
In regards to coping with the reduced margins while maintain revenue growth, Forex Magnates reached out to the broker. A company representative referred us to yesterday’s prepared remarks as their official response. Those statements relate that FXCM believes the revenue shortfall could be a unique situation where traders were attracted to the less profitable yen in Q4. Statements also showed they were bullish on the reduced spreads leading to the continued volume growth.
The statements appear to show that FXCM is embracing the low margin/high volume formula and is rolling the dice on overall activity growing enough to mitigate the margin compression. The question remains whether this model will ultimately result in higher profits and revenues. So far, this doesn’t seem to be the case. In addition, having different pricing structures per market may also lead to confusion among traders, as more active satisfied customers with higher trading costs would be expected to seek decreased spreads as well.
Interestingly, FXCM’s retail forex strategy contrasts with that of other products. Examples are CFDs where the broker is working on launching single stock CFDs as well as increasing marketing for non-forex retail products as they provide fatter margins. In addition, within their institutional business line, FXCM has acquired stakes in service-based companies to assist them in marketing towards higher-touch customers.
Answering whether yesterday’s selloff is overdone, the drop does appear to be inline as shares of FXCM had rallied about 30% higher from their summer lows as the forex market began to heat up in September. As such, shareholder expectations for Q4 may have been slightly higher than just an 8.9% jump in retail revenues. Overall, the revenue shortfall and inability of FXCM to fully mitigate its margin cut with higher volumes puts the broker in a “show me” state for 2015, which should keep prices volatile until there is greater clarity about how their new business model operates.
Shares of FXCM were on the decline yesterday following trader reaction to the broker’s after-the-close release of their operating metrics on Tuesday. Included with the December volume numbers was also Q4 guidance for their retail Forex trading division. Guidance of revenues per million dollars traded was lowered to around $70 from the $75-$80 range the broker had initially forecast to investors. Reacting to the news, shares of FXCM ultimately closed yesterday down 10.96% to $14.87 on an overall weak day for US stocks.
According to the broker, the revenue shortfall was based on lower margin Japanese yen instruments composing a greater percentage of overall volumes. Also being cited was a greater percentage of volumes originating from customers in regions where FXCM had launched its new lower pricing plan.
At the time of the pricing plan release, Forex Magnates speculated that FXCM would benefit from increased volumes in those markets, as reduced spreads have shown to directly correlate to higher customer activity. The question though was whether the increased volumes would mitigate the margin compression of these trades due to the lower pricing structure.
Initial performance has shown the reduced pricing structure to be accelerating volumes. According to FXCM, volumes in markets with the reduced pricing experienced quarter-over-quarter growth of 76%, compared to a 23% improvement in other markets and an overall increase of 40% for the broker. The more than tripling of growth in the low-spread regions related just how much reduced costs are correlated to volume increases. (One note is that Japan is included in the lower cost markets, with the country outperforming all regions in Q4. Therefore, the 76% growth may be vulnerable to a decline or smaller gains in Q1 2015.)
Despite the volume increase, retail revenues are set to underperform for Q4. Using FXCM’s estimates of $70 per million dollars traded, the broker is headed to achieve $95.62 million in retail trading revenues for Q4. This represents only an 8.9% increase from Q3 levels, despite overall volumes growing by 40%.
In regards to coping with the reduced margins while maintain revenue growth, Forex Magnates reached out to the broker. A company representative referred us to yesterday’s prepared remarks as their official response. Those statements relate that FXCM believes the revenue shortfall could be a unique situation where traders were attracted to the less profitable yen in Q4. Statements also showed they were bullish on the reduced spreads leading to the continued volume growth.
The statements appear to show that FXCM is embracing the low margin/high volume formula and is rolling the dice on overall activity growing enough to mitigate the margin compression. The question remains whether this model will ultimately result in higher profits and revenues. So far, this doesn’t seem to be the case. In addition, having different pricing structures per market may also lead to confusion among traders, as more active satisfied customers with higher trading costs would be expected to seek decreased spreads as well.
Interestingly, FXCM’s retail forex strategy contrasts with that of other products. Examples are CFDs where the broker is working on launching single stock CFDs as well as increasing marketing for non-forex retail products as they provide fatter margins. In addition, within their institutional business line, FXCM has acquired stakes in service-based companies to assist them in marketing towards higher-touch customers.
Answering whether yesterday’s selloff is overdone, the drop does appear to be inline as shares of FXCM had rallied about 30% higher from their summer lows as the forex market began to heat up in September. As such, shareholder expectations for Q4 may have been slightly higher than just an 8.9% jump in retail revenues. Overall, the revenue shortfall and inability of FXCM to fully mitigate its margin cut with higher volumes puts the broker in a “show me” state for 2015, which should keep prices volatile until there is greater clarity about how their new business model operates.
Interactive Brokers Posts Strong April Metrics, Daily Average Revenue Trades Soar 33%
Network, Learn, Grow | FMAS:24
Network, Learn, Grow | FMAS:24
Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
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Get ready to mark your calendars for FMAS:24, returning this May! Take a quick glimpse of what awaits at the Sandton Convention Centre in Sandton, South Africa from May 20-22, 2024.
Don't miss out on this 5-second invite packed with energy and urgency!
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
Follow FMevents across our social media platforms for news, insights, and event updates. Connect with us today:
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Don't miss out on our latest videos, interviews, and event coverage. Subscribe to our YouTube channel for more!
Here's a sneak peek into the FMAS:24 vibrant atmosphere! Join us at Africa’s premium financial event for a transformative experience that combines the best of finance and technology.
From May 20-22, 2024, the Sandton Convention Centre in Sandton, South Africa, will be the hub for over 3,500 attendees to engage in unparalleled networking opportunities, learn from over 150 industry-leading speakers, and explore innovations from 120+ exhibitors.
Secure your free ticket now 🔗 https://events.financemagnates.com/yQx0l?utm_source=youtube&utm_campaign=fmas-is-back&utm_medium=video&RefId=FMAS24+Video+Ad+%5B1%5D
#fmas24 #fmas #fmevents #financeinafrica #traders #investors #affiliates #forexTraders #investmentOpportunities #B2BNetworking #finTech #Innovations #TradingCommunity #BusinessOpportunities #AfricanBusiness #Johannesburg #southafrica
📣 Stay updated with the latest in finance and trading!
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Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 | Africa's Premium Financial Event
Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Looking to expand your network in #Africa? Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
📣 Stay updated with the latest in finance and trading!
Follow Finance Magnates for news, insights, and event updates across our social media platforms. Connect with us today:
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Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Join 3500+ Attendees at FMAS:24 - Africa's Premium Financial Event
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Looking to expand your network in #Africa?
Join 3500+ attendees at FMAS:24, where online trading, fintech, payments, and crypto meet! Connect with industry leaders and innovators for an unmatched networking experience.
20-22 MAY 2024
Sandton Convention Center, Sandton, South Africa
Register now to secure your spot: https://bit.ly/3JbUpCK
#fmas #fmas24 #fmevents #networking #finance #africa
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Where the Prop Trading Industry Goes from Here | Finance Magnates Podcast
Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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Explore the tumultuous world of prop trading in this Finance Magnates podcast episode, featuring insights from Head of Axi Select, Greg Rubin.
We're discussing the challenges and shifts caused by MetaQuotes' pivotal decisions affecting MT4 and MT5 users, and how Axi Select offers a unique, realistic path to professional trading, steering clear of traditional prop firm pitfalls.
Tune in for expert analysis on the future of trading and innovative funding models.
The Axi Select programme is only available to clients of AxiTrader Limited. CFDs carry a high risk of investment loss. In our dealings with you, we will act as a principal counterparty to all of your positions. This content is not available for AU, NZ, EU and UK residents. For more information, refer to our Terms of Service. Standard trading fees apply.
This content is provided solely for general informational purposes and should not be construed as financial product advice or an investment recommendation. It has been prepared without considering your personal circumstances.
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