Yup! You read it right! The hottest talk on the FX block right now is how last quarter’s most profitable broker, Gain Capital, acquired dbFX–Deutsche Bank’s retail forex arm. The move to Gain came off as a surprise because dbFX had been providing retail forex trading through FXCM’s platform and support services. Market junkies thought FXCM had the deal sealed since the transition would’ve been smoother for clients since there would be no changes in the platform. But apparently, FXCM got out bid by Gain. For how much, that’s a secret they won’t tell.
So, how will this affect every day Joe-traders like you and I?
Well, for those who are dbFX clients, they will have to get used to a new trading platform, which may tick off some. I’m sure many of them have invested a lot of time trying to understand and get comfortable with the dbFX platform. Now you’re telling them that they have to switch over to another broker and get used to a new platform? If I were in their shoes, I wouldn’t want to be part of dbFX or Gain’s customer service right now…
In the bigger scheme of things, I can’t help but wonder if this is the beginning of a longer-term trend in the broker industry. In the past year, FXCM has acquired ODL and GCI Capital, while Gain took over CMS Forex. With new capitalization and leverage rules due to be implemented soon, smaller brokers may have a harder time competing and eventually may have no choice but to sell their business to the big boys.
If that scenario plays out, would be a good or bad thing for us regular trader folk?
On one hand, you can argue that fewer brokers will leave traders with limited options, putting more of the power in the hands of the brokers. With fewer competition, they may charge higher commission fees and the quality of their service could take a turn for the worse.
On the other hand, the bigger brokers get, the more scrutinized and watched they will be by the CFTC and NFA. In addition, it will also be easier to weed out potential scammers acting as small brokers, which would beneficial to newbies who are just starting to trade.
What do you guys think? Are you in favor of the consolidation of brokers? Or would you rather have many smaller brokers? Share your thoughts in the comment box below!