A ninja always has to be aware of his surroundings, so I recently did some spying to check out how the forex broker scene has been doing. After a few minutes of stealth-work, I got my hands on a copy of the most recent financial report for U.S. retail foreign exchange dealers (RFEDs) registered with the Commodity Futures Trading Commission (CFTC).
Okay fine, all I did was visit the CFTC official website – one of my favorite sites! In any case, from my visit to the CFTC site, I learned that U.S.-regulated retail forex brokers saw an increase of about 2.86% in client assets held from February to March.
The details reveal that Oanda, the largest of all RFEDs, led the way with its 8.87% surge. This huge jump actually accounted for almost three-fourths of the total increase. Meanwhile, GFT, Advanced Markets, TradeStation, and XpressTrade were among the minority that recorded a decrease in retail forex obligations.
As impressive as this recent uptick in total client assets may be, one question we have to ask ourselves is whether this increase is a good or bad thing. I think there are two ways of looking at it.
From a negative point of view, the increase in client assets could merely be a consequence of the recent downturn in both volume and volatility.
As I have mentioned in a previous blog post, retail forex trading volumes in March were unusually low as currency intervention threats and the euro zone debt crisis caused investors to take a step back in their trading. Client assets could’ve piled up because fewer market players were trading (and therefore NOT losing money).
On a more positive outlook, the rise in client assets could be an indication that the industry is still expanding. This is a comforting thought considering that many have been saying that the increased regulation from the CFTC and the NFA has been threatening to choke off growth in the retail forex industry.
Also, once trading volumes pick up, this larger client asset base could mean more money flowing into the markets. Of course, a more liquid market is always something to look forward to!