US Forex brokers profitability report for Q1 2011
This is the first profitability report for 2011 and there are several interesting changes since last quarter’s US forex brokers
This is the first profitability report for 2011 and there are several interesting changes since last quarter’s US forex brokers profitability report: first of all IG Markets is no longer in the list as it is no longer operating directly in the US while Tradestation Forex will join this list next quarter.
The second notable change is the drop in Oanda’s client profitability. Oanda had to remove accounts which are only paid interest from the calculation as this was a new requirement set out by CFTC. This resulted in Oanda’s profitability number dropping from 51% in Q3 2010 to 43.5% in Q4 2010 and now to 38%. Oanda has also removed almost 20,000 accounts from the total number of accounts and now shows slightly less than 30,000 accounts – still by far the largest broker in the US. This means that interest-only accounts are no less than 40% out of total Oanda’s accounts.
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GFT now is the most ‘profitable’ broker in the US – this means that on average its clients are more profitable than others. Whether this actually means that clients have better chances at being profitable when trading with the ‘top’ brokers in this list – is a topic for a very long and perhaps a philosophical debate.
Oanda’s updated number of accounts also changes the total number of active (per CFTC’s definition) accounts in the US. Oanda has recaculated the number of its active accounts retroactively which puts the total number of US accounts in Q4 2010 at 107,983 (excluding IG Markets) and the current number of US accounts at 108,603 – a growth of only 0.5%. Biggest gainers in this report are Oanda and FXCM which jointly gained more than what FXDD, Interbank FX, FX Solutions, FX Club and Gain Capital lost.
As usual Advanced Markets stands out with an extremely low numbers of accounts – only 50 this quarter, however we now finally have an explanation for this – its clients are the biggest in the industry in terms of average balance. In February Advanced Markets reported $3.4 million in client capital which divided by 50 accounts results in an astonishing average $68,544 balance per account – 18 times higher the US industry average of $3800 (revised figure). On the other hand its clients are also the least profitable, which is only more confusing.
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Perhaps the most remarkable figure in this report is the average growth in overall clients profitability. Almost all brokers have reported better profitability numbers in this quarter compared to the previous one, and this is in line with my predictions. Overall clients were 2% more profitable this quarter than in the previous one (to exclude Advanced Markets effect we can use a weighted average which would give an increase of 3% in profitability instead of 2%). Comparisons such as the one I’m making here is one of the reasons behind this – brokers are trying to improve their image and as a result their profitability results are improving quarter-on-quarter. Perhaps this is what CFTC had in mind when they introduced this quarterly profitability reporting requirement.
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Michael – Do you take anything away from these numbers regarding the difference for your average retail trader between MM, STP, or ECN brokers?
So much is made of this distinction across the forums, that market makers just rob you blind, but the top two, GFT and Oanda are market makers. On the other hand, MB Trading who get a lot of love on the forums for being an ECN and paying for limits etc, and FXCM who never stop talking about their NDD/agency model are on the bottom half.
I think that the regulated market makers listed here aren’t the ones robbing the traders’ money. You can look for suspects among the unregulated ones.
And I would take the comments in the forums with a grain of salt.
As always, great information Michael!
Just a quick question, what is your source for this data? I was unable to find it in a quick google search…
Thanks!
Is there an error in your calcuation for total account size?
The number shown on that report is the total active accounts, correct? For example, doesn’t FXCM claim to have something like 170,000 traders? If so, that’d mean there are 150,000 who didn’t trade this quarter.
Next, the total customer capital represents total capital, not just active capital, correct?
So to divide total customer capital by active number of customers doesn’t make much sense to me. If so, then we have no idea the size of accounts.
I haven’t looked into this, so please correct me if I’m wrong!
Hey Michael,
Thanks for taking the time to put this information together. I have posted a link to your site on facebook and twitter. We appreciate you sharing this data.
FUZZY MATH!
Oanda lost 19,000 accounts if you compare the two quarterly reports.
But this report says they had an increase of 1500.
Oanda dropped from 46% to 38% profitable.
But this reports says they improved from Q4.
Is Oanda making this mistake/misrepresentation or the writer?
Why doesn’t the numbers match?
Please also do a fact check about OANDA’s capital. It is the only firm whose capital matches the total amount of customer funds. It fluctuates each month by the amount of customer funds.
So basically OANDA is considering the customers funds their funds or their capital and bypassing the $20MM requirement at the very least and possibly even worse USING customer funds for their own purposes.
A massive misrepresentation by OANDA on the past three quarterly disclosures makes your table comparison and report invalid and you brush it away with a note in the text. This was not a new requirement, this was what every firm had to do from the beginning but OANDA ignored it to make their numbers show better results. This is the type of smoke and mirrors that gave FX brokers bad reputations before the regulatory crack down. Now you have direct evidence of these type of shenanigans and you brush it away with a note. Doesn’t it make you question whether… Read more »
If the NFA kept the interest in the profitability calculation, other brokers likely would have started paying .001% interest to make their stats look better. The spirit of the disclosure is to help traders can assess, based on other traders’ results, their likelihood of being profitable TRADING FOREX. If they wanted to be profitable from interest alone, they would park that money in a checking account or CD, rather than go through the hassle of setting up a forex account. While obviously earning interest is preferable to traders, it is not the NFA’s job to mandate the issuance of misleading… Read more »
where we could get FXDD’s figure as ever their online chat said it’s latest one is just till Q3 2011 , http://www.fxdd.com/fileadmin/template/main/downloads/pdfs/en_US-customer_agreement-fxdd.pdf
I find these numbers very interesting. Some of these firms have so few customers it’s very unlikely they can just survive from the spread. For example FxClub, how can they still survive with so few customers. Especially in the US where you have a very high min. capital requirement. I think the reason why Oanda and GFT have so many profitable traders is because of lower spreads and NDD. Alpari on the other hand, has low spreads, but it is known that they’re a bucket shop so it shows in their clients’ profitability. Then FXCM with highers spreads is way… Read more »
I’d like to use Forex Magnates as a source, but before I can, I need to know where this information comes from. If I reference a fact in a New York Times article, even the NYT provides who their sources were or how they got their information.