Fallout from the NFA’s credit card ban
Fallout from the NFA’s credit card ban explained by professional Forex trading experts the “Fallout from the NFA’s credit card ban” FX trading team.
Fallout from the NFA’s credit card ban
Our article posted last week breaking the news that the NFA plans to ban the use of credit cards and “alternative funding mechanisms” such as PayPal to fund retail customer accounts has generated a tremendous amount of chatter and commentary — some even suggest that this will somehow be good for the retail FX industry — as well as questions, such as what the effect of the credit card ban will be.
First we should note, that following discussions with industry insiders and others involved in the situation, it does seem likely that the NFA plans to go through with this new rule. And, that it will indeed be damaging to those engaging in the retail FX business in the U.S.
So who will be hurt the most? Clearly, those with the most to lose are FX brokers with:
a large U.S. retail client base
historically high credit card deposit rates, and
only a U.S. presence but no international regulated subsidiaries.
Comparing the two largest U.S. based firms, FXCM vs. Gain Capital (Forex.com) — Digging through the filings of the two largest U.S.-based retail FX firms, it seems to us that Gain Capital has more to lose than FXCM. Gain Capital stopped providing geographic volume data about a year ago, but based on its most recent numbers and the fact that it recently picked up GFT’s U.S. clients we estimate that Gain Capital (Forex.com) does about 1/3 of its retail volume in the U.S., versus just 11% for FXCM. And Gain reports (in its 2011 10-K) that 37% of its customer deposits were made by credit card, versus less than 20% at FXCM — and just 3% of FXCM’s U.S. client deposits arrived via credit card.
Fallout from the NFA’s credit card ban Conclusion
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