Why Forex Industry Volumes Slumped in February

After kicking off 2015 on a strong note with upbeat industry metrics for January, forex volumes retreated in February. Remember that SNB shocker earlier this year? Well, it looks like several brokers and market participants decided to play it safe afterwards while financial regulators also tried to keep excessive risk-taking in check.

forex industry volumesMost forex firms that have already printed their February metrics reported double-digit declines in volumes. Danish forex broker Saxo Bank showed a 37.5% decline in average daily forex trading volumes compared to January while one of Japan’s top-rated brokers, DMM Securities, indicated a 35.4% monthly decline in trading volumes. Not even leading global currency brokers were exempt from the downturn, as GMO Click chalked up a 20% month-on-month drop in trading activity.

Institutional trading also took a hit, as GAIN Capital reported a 22.6% decline in total institutional forex trading volume from January 2015 and a 15.7% drop from a year ago. On the other hand, a few forex brokers were able to enjoy an increase in institutional client funds as a result of acquiring other firms that had to close shop in the aftermath of the infamous SNB announcement.

Interestingly enough, some also reported an increase in retail client deposits for February, with Alpari reaching the 1,000,000 account milestone, excluding accounts from former Alpari UK and US units. Meanwhile, Saxo Bank’s February client deposits amounted to $11.09 billion, 6% higher compared to January’s levels. Japan-based Monex Group reported a slight increase in the total number of active trading accounts to 47,803 in February.

As mentioned in my previous article on forex industry metrics at the start of this year, the change in margin requirements and stricter leverage rules imposed by regulatory agencies took its toll on trading activity last month. Apart from that, forex market participants seem to have exercised more caution with their trades, limiting their exposure in case another “black swan” event wreaks havoc in the financial markets. Do you think that trading activity is bound to recover this month though?