Volatility Drives Up Slumbering Retail Volumes: GAIN Hits Fresh Record

With clients hedging and rebalancing their portfolios, GAIN Capital’s retail traders transacted $388.6 billion in March.

With this last month’s coronavirus-driven volatility having shaken awake previously quite FX markets, retail volumes at GAIN Capital Holdings, Inc. (NYSE: GCAP) shot higher in March. The largest FX broker in the US also managed to best its 2019 equivalent as March turnover swelled to more than two times their 12-month daily average.

With clients hedging and rebalancing their portfolios, GAIN Capital’s retail traders transacted a total of $388.6 billion in March 2020, up 95 percent month-over-month from $199 billion in February and more than double the daily average reported year-to-date. Over a yearly timetable, GAIN’s latest retail OTC volume had run 130 percent above March 2019 averages of $169 billion.

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The group’s average daily volumes (ADVs) came in at $17.7 billion in March 2020, up 78 percent month-over-month from $9.9 billion per day in February 2020. This figure has more than doubled on a yearly basis from $8.0 billion the previous year.

Before the first quarter, FX retail platforms and elsewhere had suffered a prolonged period of low volatility and lackluster volumes, crimping profitability. In particular, GAIN’s net revenues for Q4 2019 came in ‎at $53.3 million, down 33 percent when compared with $79.9 million ‎in the same quarter a year ago. Furthermore, the year ending December 31, 2019, netted a ‎revenue drop of 35 percent year-over-year, having plunged to $234 million from $358.0 million reported ‎back in fiscal 2018.‎

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Despite the weak financial results, GAIN Capital stock is still up by over 60 percent off yearly lows after news about an acquisition offer from INTL FCStone started making rounds in trading circles last month.

Futures volume stalls

The bottom line figure was downbeat across both the quarterly and yearly timetables, showing a net loss swollen to $31.2 million for the fourth quarter ‎vs. $0.7 million in Q4 2018.

At the time, the company’s CEO suggested that an unusually low volatility environment last year hit its fortunes and resulted in lower activity across the markets, which led to its disappointing numbers.

Meanwhile, active accounts in the retail segment totaled 132,841 in March 2020, which increased on a monthly basis by five percent from 125,943 accounts in February 2020. This reading was also higher 10 percent relative to 120,641 in March 2019.

Finally, futures trading rose last month to 701,820 contracts, corresponding to an increase of 13 percent from a year earlier when weighed against 622,194 contracts in 2019.

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