Gain Capital finalizes acquisition of FXCM’s US clients

Retail forex broker Gain Capital Holdings Inc (NYSE:GCAP) has announced that it has reached a definitive agreement to acquire the US clients of rival FXCM Inc (NASDAQ:FXCM).

Gain declined to say how much it was paying for the FXCM US client base. However we believe that very little cash changed hands (more on that below).

Gain did say that the acquired clients represented about $2.4 billion in average daily trading volume at FXCM in Q4-2016, or about $53 billion in monthly volume – roughly 20% of FXCM’s overall retail forex volume.

We reported yesterday that FXCM and its high profile CEO Drew Niv were being (amazingly) banned from the US Retail Forex sector, following settlement of allegations that FXCM defrauded its customers over the course of several years as to the nature of its market making activities.

Continuing the overnight drama, both FXCM and Gain Capital each proceeded to put out awkward and clearly hastily-constructed press releases, announcing that FXCM had ‘sold’ its US clients to Gain Capital and its and GTX brands.

But further investigation reveals that the agreement between FXCM and Gain Capital wasn’t really finalized, nor were terms and price agreed upon. In Gain Capital’s words, the original agreement was a ‘non-binding letter of intent to acquire the client base of FXCM’s U.S. operations‘.

Gain went on to state that the transaction ‘is subject to Gain and FXCM reaching a definitive agreement a… if a final agreement is reached.

Even the title of Gain’s press release Monday evening stated that the company was ‘in discussion‘ to acquire FXCM’s US operations.

That is not the way business is usually done between companies, especially publicly traded companies such as FXCM and Gain which must disclosed all material transactions and agreements. Companies do not usually want to announce half-baked deals.

So what happened here?

It seems as though FXCM did not want to leave their (soon-to-be-former) US clients hanging, and so came to a hastily-agreed-upon ‘deal’ with Gain Capital to announce a new home for those clients, even though details hadn’t been finalized.

Back to the consideration…. we believe that the deal was done for little to no cash upfront. And why would Gain Capital pay much? FXCM’s clients don’t really have anywhere else to go, with Gain’s brand being the only other real game in town (other than the smaller and less visible Oanda) in the regulated US retail forex sector.

However the real benefit to FXCM of ‘ridding itself’ of its US clients, with whom it admitted yesterday it was losing money anyway, is freeing up more than $50 million in capital. Doing business in the US retail forex sector is very expensive, requiring that minimum capital of $20 million be effectively parked with regulators, with that figure rising with client asset levels.

FXCM had more than $50 million of its own money tied up with US regulators. After paying its $7 million fine, the company should now be able to put most of that money to good use in paying down its high-interest loan from Leucadia National Corp (NYSE:LUK), the balance of which was hovering near the $150 million level at year-end.

Gain Capital’s press release on the now-final agreement reads as follows:

Gain Capital Agrees To Acquire Client Base Of FXCM’s U.S. Operations

Former FXCM clients will be transferred to

BEDMINSTER, N.J., Feb. 7, 2017 /PRNewswire/ — GAIN Capital Holdings, Inc. (NYSE: GCAP) (“GAIN” or “the Company”), a global provider of online trading services, announced that it has entered into a definitive agreement to acquire the client base of FXCM’s U.S. operations.  For the 3 months ended December 31, 2016, average daily volume from customers of FXCM’s U.S. operations was approximately $2.4 billion.  Financial terms of the transaction were not disclosed.

Under the terms of the agreement, customers of FXCM’s U.S. regulated business will be transferred to GAIN Capital’s retail trading service, (  The transaction is subject to final regulatory approval.  It is expected to close before the end of February.

“We are excited to welcome customers of FXCM’s U.S. operations to our award-winning service,” said Glenn Stevens, CEO, GAIN Capital.  “They will become part of one of the largest and most well-capitalized providers of retail FX trading services globally.  At GAIN Capital, we pride ourselves on our 17-year track record of protecting our clients and delivering on their FX trading needs.”

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