City Index, owner of FX Solutions, is the latest major FX firm to abandon the U.S.
It should come as no surprise to those who follow our blog, or the FX industry generally, that yet another international FX firm has decided that their capital is better deployed somewhere other than the U.S. After recently seeing firms such as FX Club, Deutsche Bank's dbFX, and GFT leave the U.S. market, now we see City Index's FX Solutions division leave the U.S., selling its U.S. client base to Gain Capital (Forex.com). Gain Capital was also the acquirer of dbFX and GFT's U.S. clients.
But what exactly is Gain Capital getting?
Some quick math. During December, as per above, Gain Capital bought GFT's U.S. clients. Immediately before the acquisition, GFT had more than $81 million of client assets in its U.S. entity. At the end of December, Gain Capital's reported U.S. client assets increased by just $7 million (see table below, based on CFTC data). While some of the $81 million in GFT client assets were probably foreign clients whose accounts were technically with GFT U.S., and may have been moved by GFT to GFT UK before the asset sale to Gain Capital, we believe that this huge discrepancy in numbers shows how hard it is to truly acquire retail FX assets.
U.S. clients at GFT were effectively told to open accounts with Gain Capital, yet were free to open accounts elsewhere or just shut down, which obviously many did. And with FX Solutions having just a fraction of the client assets GFT did, at about $15 million (down from $17.5 million one year prior), we believe that not much money changed hands here, as at the end of the day Gain Capital is not really going to be acquiring much, if anything, other than a nifty press release being regurgitated throughout the Forex blog universe as if some great "scoop" happened here.
We don't mean to cause our audience to yawn, but frankly we feel the same way here. Remember, the largest of Gain Capital's similar acquisitions was for dbFX, and in that deal Gain Capital paid just $2.5 million in upfront cash.