The Disappearing US Forex Market

The Disappearing US Forex Market explained by professional Forex trading experts the “The Disappearing US Forex Market” FX trading team.

The Disappearing US Forex Market

The two leading US-based Forex trading firms, FXCM and Gain Capital (, have each reported Q3 results which showed nice growth in international expansion rates, overall trading volumes, revenues and net profit. Not bad in what has been a very topsy-turvy financial market across the globe.

However, lost in some of the numbers was the fact that trading volumes in their home market, the US, have dwindled to their lowest levels in years.

Sources: FXCM, Gain Capital.

As per the chart above, US trading volumes in Q3-2011 were down 26% at FXCM and 83% (!!) at Gain Capital from 2010 average levels. And this at a time when overall global trading volumes were up nicely during Q3. FXCM and Gain both reported healthy volume gains outside the US. Other firms outside the US, such as FxPro and Swissquote, also reported increasing Q3 trading levels. Volumes in the Forex industry typically move in tandem with volatility, and Q3 had lots of it in both the equity and currency markets – caused by S&P’s downgrading of the US, the Greece-Europe crisis, the Swiss National Bank’s effective revaluation of the Swiss Franc, ……

These figures are even more puzzling given that there was a lot less competition in the US Forex market this year than last. Continuing consolidation (such as Gain Capital’s April 2011 acquisition of Deutsche Bank’s entrant in this market, dbFX), alongside new rules disallowing foreign commercial banks (which prior to July 2011 had been exempted from NFA/CFTC registration) from offering Forex trading services to US customers should have led to a nice rise in trading among US clients for the handful of remaining domestic Forex firms, led by FXCM and Gain Capital.

Why the large drop in US volumes? In our opinion, there is a very simple answer – over-regulation.

The Disappearing US Forex Market Conclusion

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