4 Milestones in the Forex Market for 2011

Thanks to Forex Gump, we know what happened to the dollar, the euro, and all the other major currencies in 2011. But how did the forex industry fare during the year?

After digging through some old notes, I was able to round up four milestones in the forex industry for the year that was. Sit back, relax, and read up!

1. The forex market continued to expand.

Ah, isn’t that good news? In 2011, trading volumes continued to grow with the total monthly retail trading volume reaching $4,777 and the daily figure tapping $217 billion, according to a research by Forex Magnates.

It’s noteworthy to point out that volume particularly surged in March, when Japan was hit by the devastating earthquake and tsunami, and in September, at the height of the euro zone debt crisis. This implies that it may not be organic growth driving up volume. Rather, traders could be lured in by volatility in the markets.

2. Regulators stepped up their game in enforcing stricter requirements.

Shout out to my homeboys at the CFTC and NFA!

The CFTC made it mandatory for all brokers to register with American clients or stop accepting them altogether. Of course, there were a few brave souls who played fire with the CFTC and stubbornly refused its new rule. Consequently, 25 forex firms got a lawsuit from the agency during the year.

Meanwhile, the NFA sued a few brokers including FXCM for failing to comply with some of its requirements. It also launched an investigation on all forex brokers to find out what deficiencies these firms still have to address.

3. Forex brokers go local!

With the forex industry in the U.S. undergoing stricter regulation by the CFTC and NFA, brokers such as FXCM, Oanda, and Alpari decided to branch out and acquire local brokerages in other countries. Several traders also decided to open accounts through offshore brokerages in order to take advantage of less strict industry rules elsewhere.

With that, Japan emerged as a growing hub for both foreign brokers and trading software providers.

4. Some forex brokers enjoyed their first full year of being public.

Towards the end of 2010, both FXCM and Gain announced that they were going public. Being among the top forex brokers, they thought that it was about time to take advantage of the forex industry’s booming popularity and debut at the New York Stock Exchange with their initial public offerings.

However, after an entire year of being public, these brokers failed to impress as their shares traded as low as 40% of their IPOs. Although bad publicity from several lawsuits was being pinpointed as the reason for the slump, it seems that other brokers got discouraged from going public themselves.

There you have it, folks! Being a relatively young industry, the forex market had its share of ups and downs for the year, and it will probably be in for more this 2012. As always, stay tuned and I’ll keep you posted!

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