Brace Yourself, Forex Volumes are Rising

Just when it seemed that the recent trend of consolidation was taking its toll on forex volumes, it looks as if activity is back on the rise! According to my sources, two of the biggest players in the game saw a sharp increase in revenue and trading volumes during Q1 2013.

FXCM

FXCM reported an increase in revenues of 20%, as revenues hit $122.9 million during the first quarter. What’s more impressive is that its EBITDA was actually up a whopping 76% over that time period.

For those of you who aren’t so familiar with accounting terms, EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Basically, this refers to how much money a company makes from its operations. As a general rule of thumb, rising EBITDA is a good sign of profitability.

According to FXCM CEO Drew Niv, the surge in growth of client accounts and the improvement of trading conditions in Q1 2013 were the major driving factors for the increase in operational efficiency.

Gain Capital

The other market leader who did a good job last quarter was actually one of FXCM’s fiercest rivals, Gain Capital. Reports show that it posted an impressive 50% year-on-year increase in revenues. Moreover, EBITDA increased from $1.3 million USD to $7.5 million. For those of you who hate doing the math, that’s an increase of over 500%!

Gain’s CEO, Glenn Stevens (not to be confused with the incumbent RBA Governor), highlighted a rising trend in crucial operating metrics. One of them was the 40% increase in client assets year-on-year, bringing the total amount to $456.9 million, which is its highest level ever.

Q2 and Beyond

The numbers from both FXCM and Gain Capital seem to suggest a recovery in trading activity, which will hopefully continue in the following quarters. In fact, preliminary figures in April show that once again, volumes rose year-on-year.

Trading volume from retail customers at FXCM, for instance, skyrocketed to $366 billion in April, marking an almost 50% increase from the same month in the previous year. Meanwhile, trading volume from institutional customers rose to $183 billion, a jump of roughly 46% from April 2012. For more information, you can check out FXCM’s most recent press release.

At Gain Capital, retail trading volume has reached $145.8 billion in April. This translates to a 26% increase from April 2012. Institutional trading volume, on the other hand, more than doubled, increasing 103% to $315.8 billion. Gain Capital reveals more statistics in its April 2013 report.

While FXCM and Gain Capital aren’t representative of the entire forex market, they are two of the biggest brokers. Their trading metrics can provide us with some clues with regards to the activity in the forex market, as well as the overall direction of the industry. And if these numbers will continue to improve, hopefully an increase in liquidity means service innovation, tighter spreads, and more trading opportunities!