Continued consolidation; European regulation; Far East grows.
Tis the season for predictions. And when we at LeapRate look into our crystal ball for 2012, we basically see a continuation of three key trends which began to take hold of the Forex industry in 2011. The one thing which is hard, if impossible, to predict is industry volumes. Forex and CFD trading volumes co-relate strongly with volatility, and volatility is impossible to foresee. Looking forward, we see the following:
1) Industry consolidation will continue. In 2011 we bade farewell to Deutsche Bank's dbFX (acquired by Gain Capital), IBFX (bought by TradeStation, which itself was acquired by Japanese broker Monex), eForex bought by AvaFX), ForexYard (bought by Safecap / Markets.com), as well as several Japanese Forex brokers. We expect this trend of acquisitions to continue in 2012, as tighter regulations have created problems for smaller brokers, and as now-public companies such as FXCM and Gain Capital are under pressure to continue to show growth as markets mature. We expect more U.S. brokers to disappear, and some merging of European brokers as regulations tighten and competition intensifies on the continent. (For a complete list of Forex industry M&A back to 2005, as well as acquisition multiples paid, see the LeapRate-Dow Jones Forex Industry Report.)
2) European regulation will tighten. Following on the heels of much more strict rules enacted by both U.S. and Japanese regulators, we expect European regulators to begin to move to tighten things up as well, although they will likely not go as far as in the U.S. or Japan. MiFID II, which is still in the planning phases, is likely to cause more uniformity in regulation among the various EU / EEA individual country regulators. Similarly, new pan-European securities regulator ESMA gave notice in early December that it is paying increasing attention to the Forex industry, and is likely to try and flex some of its regulatory muscle by tightening regulations and lobbying to set higher standards across all EU / EEA countries.
For more on where Forex regulation is going, sign up for Dow Jones' webinar Forex Regulation - What's in Store, Tuesday January 24 @ 10am EDT / 3pm GMT / 4pm CET. Click here for more info and to sign up.
3) Asia growth continues. It is clear that many of the leading global Forex firms are putting more and more advertising and business development dollars into the Far East. The best example of this trend is U.S.-based Gain Capital (Forex.com), which went from doing more than half its volume in the U.S. in 2010 to doing a whopping 74% of its volume in Asia in Q3-2011.