Q1 2015 Forex Industry Metrics: Any Signs of Life?

Now that the top forex firms in the U.S. have released their numbers for Q1 2015, let’s review the latest metrics to see how volumes and profitability fared in the first three months of the year. If you’ve been keeping track of my forex reviews for January and February, you’d know that the industry was off to a rough start mostly due to the SNB shocker.

forex volumesBoth brokers and clients suffered huge losses back then, as the Swiss central bank’s surprise decision to scrap the franc peg caused chaos among most currency pairs. Overleveraged traders suddenly incurred negative account balances, and the inability of some brokers to collect payments on these forced them to close shop. This ushered in darker days for the industry, as the extra amount of caution exercised by most forex participants in the aftermath of the event resulted to a huge slump in trading volumes for February.

But just like the Avengers who refused to stand down after encountering a seemingly unbeatable foe, the forex market got back on its feet the following month and posted a rebound in both retail and institutional sectors. After crunching the numbers, LeapRate reported a 10% surge in its Retail FX Volume Index for March, as brokers relaxed margin requirements. Industry analysts also noted a pickup in trading volatility, with market catalysts sparking strong moves across the charts.

For one, central bank action has been responsible for prolonged trends in the past few months, as some have adjusted monetary policy in reaction to the downturn in price levels. The perceived slowdown in the U.S. economy has also emerged as a major market theme then, along with the political shift in Greece and speculations of a potential debt default.

CME Group, the world’s leading derivatives marketplace, also reported a surge in forex volumes for March. According to their latest report, daily FX volume averaged at 1.1 million contracts or a notional value of $112 billion – 27% higher compared to the same month a year ago. On a quarterly basis, average daily FX volume is up by 17% for Q1 2015.

Meanwhile, Finance Magnates revealed that client profitability also improved among U.S. accounts. For the first three months of 2015, 36.4% of U.S. clients were in the black, higher than the 36.2% figure for the previous quarter. The number of active accounts also increased significantly, with a 4.3% growth to a total of 96,112 U.S. accounts showing activity for the period.

All in all, these suggest that forex market participants may have already moved on from the market shock earlier in the year and are probably taking the necessary steps to maintain profitability even with a few changes in brokers’ leverage limits and margin requirements. Do you think the industry can keep up its good streak in the next few months or are the summer doldrums about to set in?