Before we bid farewell to 2013, let’s take a quick walk down memory lane and look at the top headlines for the forex industry this year:
1. Forex brokers started the year with a bang!
After the slump in forex market activity during the latter half of 2012, trading volumes and profitability zoomed off in a roaring start this year. Account growth for both Interactive Brokers and Gain Capital surged in Q1, allowing them to catch up to market leaders such as FXCM and Oanda.
Aside from that, EBS reported a 5% jump in trading volumes on their forex platforms while Reuters boasted of an impressive 24% increase during the first few months of 2013. For EBS, average monthly trading volume climbed to its highest levels since October 2011, mostly spurred by shake-ups in central bank leadership.
2. Volume picked up into the second half of the year
Industry activity continued to pick up in Q2, as both retail and institutional trading volume gained steam. FXCM, one of the top brokers in the industry, saw an annualized 50% increase in retail forex volumes for April while Gain Capital reported a 26% year-on-year rise.
Even smaller industry players reported significant gains in their trading volume for the period, leading to a noticeable increase in share prices of publicly-traded forex firms. Central banks also took note of the hustle and bustle in the spot forex market, thanks to the BOJ’s stimulus announcement in April and the corresponding spike in volatility for yen pairs.
3. China opens up to forex brokers
Another noteworthy development in the foreign exchange industry for 2013 is China’s decision to open up to forex brokers. Prior to this, forex trading among Chinese investors was mostly conducted through offshore brokers in Hong Kong and Singapore.
All that changed in May 2013, when China’s forex regulator SAFE (State Administration of Forex Exchange) decided to scrap 24 clauses in its industry rules, paving the way for easier foreign direct investment flows to China. It also made plans to implement new guidelines, such as cross-border netting and instant approval procedures for companies moving their funds in and out of the country.
4. Rise of bitcoin and binary options
One of the more interesting and controversial developments in the industry this year was the rise in popularity of binary options and bitcoins as alternative trading instruments. After all, volatility in the forex market tends to slow down every now and then, leading traders to seek more exciting trading opportunities elsewhere.
Binary forex options have drawn a lot of attention, as these offer various ways of profiting from forex market moves. Although regulation is still underway, this alternative way of making money from foreign exchange rate fluctuations is exhibiting a lot of potential.
Meanwhile, bitcoin trading has proved to be a very lucrative endeavor so far, as the price of a single unit has quadrupled in a span of a few months. In fact, a few companies have recognized the possible surge in market share, as U.K. forex company Plus500 and Slovenian broker Bit4X have added bitcoin trading to their list of services.
5. Slowdown until the end of the year?
Along with the growing popularity of alternative trading instruments came a slowdown in spot forex activity. Brokers seemed to be off to a slow start in Q3, as FXCM reported a 2% drop in retail forex volumes and a mere 1% increase in institutional volumes.
The seasonal drop in liquidity for the summer months is one of the culprits for the downturn in trading volumes typically seen towards the end of the year. Aside from that, uncertainty surrounding the Fed taper also made traders hesitant to take on any large, long-term positions on major pairs.
That’s all I got! If you think I’ve missed any game-changing events in the forex industry, feel free to discuss ‘em in the comments section below.