In its most recent metrics report, forex broker FXCM reveals a few statistics that could help us determine the overall trend during the first half of this year in the retail and institutional forex trading industry. Here's the original press release:
FXCM Inc. (NYSE: FXCM) today announced certain key operating metrics for June 2012 for its retail and institutional foreign exchange business. Monthly activities included:
Retail Trading Metrics
- Retail customer trading volume(1) of $317 billion in June 2012, 4% higher than May 2012 and flat with June 2011. Volume from indirect sources was 44% of total retail volume(1) in the second quarter 2012. Retail customer trading volume(1) for the second quarter 2012 was $869 billion, 12% lower than the first quarter 2012, and 7% lower than the second quarter 2011.
- Average retail customer trading volume(1) per day of $15.1 billion in June 2012, 14% higher than May 2012 and 5% higher than June 2011.
- An average of 414,502 retail customer trades per day in June 2012, 14% higher than May 2012 and 14% higher than June 2011.
- Tradeable accounts(2) of 205,111 as of June 30, 2012, an increase of 1,238, or 1% from May 2012, and an increase of 33,973,or 20%, from June 2011.
Institutional Trading Metrics
- Institutional customer trading volume(1) of $161 billion in June 2012, 16% higher than May 2012 and 123% higher than June 2011. Institutional customer trading volume(1) for the second quarter 2012 was $402 billion, 1% higher than the first quarter 2012 and 88% higher than the second quarter 2011.
- Average institutional trading volume(1) per day of $7.7 billion in June 2012, 27% higher than May 2012 and 134% higher than June 2011.
- An average of 17,937 institutional client trades per day in June 2012, 9% higher than May 2012 and 147% higher than June 2011.
More information, including historical results for each of the above metrics, can be found on the investor relations page of the Company's corporate web site, www.fxcm.com.
This operating data is preliminary and subject to revision and should not be taken as an indication of the financial performance of FXCM Inc. FXCM undertakes no obligation to publicly update or review previously reported operating data. Any updates to previously reported operating data will be reflected in the historical operating data that can be found on the Investor Relations page of the Company's corporate web site, www.fxcm.com.
(1) Volume that FXCM customers traded in period translated into US dollars.
(2) An account that has sufficient funds to place a trade in accordance with FXCM trading policies.
Quarter-on-quarter, it's pretty clear that retail data and institutional data diverged. According to the stats, retail forex trading in Q2 2012 fell compared to both Q1 2012 and Q2 2011. However, for institutional accounts, trading volume increased in Q2 2012 compared to both Q1 2012 and Q2 2012.
Month-on-month, both retail and institutional accounts showed increases in volumes. Retail customer trading volume was higher by 4% in June compared to May while institutional trading volume was a whopping 16% higher for the same period.
Q2 2012 was generally weak but this was probably the effect of the problems in the euro zone and the start of the summer holidays. On a month-on-month basis, everything seems to be showing growth for both retail and institutional accounts.
These stats are by no means representative of the entire retail forex industry, but as they are from one of the largest brokers in the world, they do provide clues as to where the industry is headed.
What these numbers tell us is that the retail forex industry may see its dips every now and then (e.g., lower activity during the U.S. financial crisis, the euro zone breakup scare, and central bank interventions), but conditions eventually stabilize and the long-term trend remains intact. The fact of the matter is that the forex industry is still growing.
It's not surprising to see trading volume on the rise because forex still offers the best trading vehicle for short-term investors thanks to its volatility and unmatched liquidity. Couple that with its longer-term trends and the possibly collect interest, and forex is a great option for investors to setup and exit longer-term positions with ease.
At the end of the day, forex remains a great industry to enter, assuming you dedicate enough time to learn the ins and outs and treat it like any other business venture.
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