Saxo Bank 2011 results – FX Volumes up, but Revenue down

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Indicative of industry-wide decreasing FX spreads.

Saxo logoLeading FX brokerage firm Saxo Bank (a member of LeapRate's Approved List) announced today its results for 2011. Saxo Bank clearly bucked the trend of decreasing FX volumes seen at other Forex firms, reporting that FX volumes rose to $275 billion per month (in 2H-2011), up from $222 billion in the first half of the year (green bars below). And although FX volumes were up nicely, revenues from FX activities fell from $238 million in 1H to $211 million in 2H-2011 (blue bars).

Saxo Bank rev and vol

On a per-transaction basis, Saxo Bank is demonstrating a trend we have seen at certain other FX firms, as well as at Forex ECNs – that is lower margins, caused by a more competitive environment in which Forex firms are lowering spreads to attract and keep clients. Saxo's pips-earned-per-round-trip-trade fell in 2H-2011 to a multi-year low of 2.55, as follows:

Saxo Bank pips per RT trade

Overall, Saxo Bank had a very good 2011, with total revenues up 6% over 2010 to DKK 3.5 billion (about $634 million), EBITDA of DKK 1.2 billion ($208 million), and net income of DKK 618 million ($111 million).

Other interesting notes from Saxo Bank's Annual Report (to download it click here):

  • MetaTrader launch – Saxo clearly linked its 25% investment in Leverate last year to the planned launch of MT4 trading for Saxo clients. Saxo stated that it plans to launch MT4 at some point in 2012. This will mark the first non-proprietary platform Saxo will offer to its clients, as Saxo is quite proud of its in-house software and IT capabilities. As part of the planned MT4 launch Saxo quietly acquired  MT4-based Lembex Trading during 2011 (pending regulatory approval). Saxo will run its MT4 operations out of Cyprus, a leading MT4 center. 
  • CFD volume – without giving specific volume figures, Saxo reported that it "saw a significant increase in average monthly volumes traded compared to the same period last year". Given that Saxo Bank's revenues from "Derivative financial instruments" (i.e. Forex options, CFDs, etc.) in 2011 were about 16% of FX revenues, we estimate that Saxo's CFD volume is currently at  about $45 billion per month

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Guest Wednesday, 16 April 2014

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