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Finally! After reporting back-to-back quarters of losses, one of the most renowned brokers in the market, Gain Capital, announced that it returned to profits in Q2 2012. It reported a net income of $4.4 million and net revenue of $5.0 million for April to June 2012.

The figures were pleasant news to the broker which incurred net losses amounting to $3.3 million in Q4 2011 and $1.3 million in Q1 2012.

Glenn Stevens (not the RBA head honcho), CEO of Gain Capital, was happy to report that both the retail and institutional sectors of the business generated profits.

He especially noted the performance of its retail forex trading which generated net revenue of $40.8 million. Although it’s lower than the $54.1 million that it earned in the previous quarter, it’s still much higher than the $29.4 million in revenue that it clocked in for Q4 2011.

Meanwhile, the revenue raised by its institutional arm, known as GAIN GTX, was up at $4.2 million from $900,000 in Q1 2011.

Sounds awesome, right?

However, the report also revealed that trading volumes in both the institutional and retail sectors were down for the period. Institutional volume, which is comprised of trades from banks and financial firms, dropped from $468 billion from $442.5 billion USD during the first quarter.

Meanwhile, retail forex trading volume fell from $385 billion to $340 billion, its lowest reading in nearly two years!

Among the factors that could’ve resulted in this drop was the increased uncertainty in the financial markets spurred by eurozone debt problems and QE3 speculations. Traders were probably unwilling to take huge positions and were feeling extra cautious of the volatility that these risks presented.

Despite the lower trading volumes, higher revenues on these trades highlight the unpredictability of being a market maker like Gain Capital.

Unlike Electronic Communications Networks (ECNs) which profit from fixed commissions on transactions, market makers make money from fixed spreads between the bid and ask prices.

As such, it’s tougher for the latter to make a profit when market conditions are more unstable, forcing a market maker’s liquidity provider to vary spreads on them.

Although being a market maker is a challenge for Gain Capital, the broker is still determined to pursue growth.

Through its acquisition of online futures broker Open E Cry last month, its launch of FOREX.COM in Canada, and partnering with more institutional brokers, it hopes to weather the storm in these uncertain financial markets.