FX industry watch FX BROKERS
Publicly Traded FX Broker Companies’ Shares Are On the Rise
Over the past couple of months, shares of publicly traded forex brokerages have been on an upward trajectory. Gain Capital is up by more than 40%, FXCM follows closely with an up move of more than 20%, whilst Japanese company Monex has platoed after rising about 35% during the previous quarter. Driven by a rise in volatility in the foreign exchange
markets, FX brokers
around the world are trading close to all time highs. With retail traders beginning to consider the change in the Federal Reserve’s monetary policy direction and the need for increased regulation continues, the companies most likely will go on overperforming the broad stock market indices.
The companies have had solid
recoveries in their institutional volumes in April and May, and their retail business is not losing steam operating at record levels. Most of these companies are backed by a solid balance sheet and have scope for further expansion domestically and internationally. FX brokers generate the majority of their revenues by pairing retail foreign exchange transactions on the
interbank FX market and keeping the spread.
April was a hot month for the industry with FXCM proposing an acquisition of GAIN Capital which was subsequently rejected and followed by a strategic acquisition. GAIN Capital has acquired GFT and stated that a potential take over by FXCM would “significantly undervalue the Company and its prospects”. For now the increase in volatility in the forex market is good for business and until we see a substantial drop in that, we could see some more companies in the industry going public this year.
TRADERS PRIVACY
The major financial-news provider Bloomberg which has managed to build a fortune and a reputation on blending financial journalism and a proprietary data-delivery system which has become an indispensable Wall Street tool is ripe in scandal. In the beginning of May the company has put its reputation at a huge risk by negligently mixing the two.
According to news reports, Bloomberg News journalists have been watching in secret on some of their customers that use their terminals. Those customers include Goldman Sachs and JPMorgan Chase, Ben Bernanke and Timothy Geithner. Customers were outraged by the fact and some have reacted immediately by taking legal action against Bloomberg on what they perceive as a violation of their privacy.
The company has said that it addressed the complaints immediately and closed the backdoors that its reporters had allegedly used to “keep an eye” on customers’ activities to find potential stories, which allegedly include the company’s revealing of the “London Whale” tumultuous trading disaster at J.P. Morgan.
Bloomberg News journalists had the ability to access different sorts of data that are not available to the rest of the terminal’s users. Some of these included the ability to check how often customers had logged on to their terminals and some user tracking of their activities once connected. They could discover how many times a client had entered given commands into the terminal, or pulled up information about foreign currencies and economic indicators.
71 FX TRADER MAGAZINE July - September 2013
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