GAIN Capital’s Glenn Stevens speaks one year after City Index acquisition

LeapRate Exclusive Interview… It was one year ago today that Gain Capital Holdings Inc (NYSE:GCAP) closed on its $77 million acquisition of City Index, to become a major player in the UK online trading industry.

More recently, GAIN’s latest moves have taken the company in other directions, such as our recent coverage of the company’s plans to launch an online money transfer business under the URL

So how has the past year gone for GAIN Capital? And what does the future hold?

We thought it would be a good time to catch up with GAIN Capital CEO Glenn Stevens. He provided us with some fairly interesting insights into integrating City Index (and what will become of the City Index trading platform during 2016), a soon-to-be-launched brand new website, the plans for the money transfer business, and a whole lot more.


LR: Hi Glenn. It’s a year ago today that you acquired City Index.  How has the last year gone?

Glenn: April 1st marks the one year anniversary of our acquisition of City Index. It’s been a very busy 12 months and we’re pleased with the progress we are making to integrate our two companies. In addition to integrating our regulated entities and our operations, we are in the process of transitioning onto City Index’s trading technology.

Gain Capital acquires City IndexWe have already completed the migration of over 16,000 clients and 35 partners from GFT’s legacy Dealbook platform to the City Index platform and are on track to retire the platform in the second quarter of 2016. This year we are also gearing up to introduce the Advantage Trader platform suite to our clients and are investing in significant enhancements to our desktop and mobile trading platforms, as well as other service enhancements around that launch.

The benefits of the City Index acquisition are paying off – we’re consolidating our technology offering to simplify our business and reduce costs. We have two very strong global brands in and City Index that position us as a top three provider in the primary FX/CFD markets around the world; and we have a wide product offering of over 12,500 products, which has allowed us to broaden the mix of our customer volume. In the 2nd half of 2014, FX represented 48% of our total retail volume; for the same period of 2015 FX was 35% with the remaining 65% coming from CFDs on indices, commodities and equities.

We have and will continue to focus on optimizing our partnership business by shedding underperforming partners.  We also divested the legacy GFT Salestrader business last year, which was a very low margin and capital-intensive business.  In both cases, we were willing to sacrifice low revenue volume in the short term so we could focus on higher margin business and building products and services that meet the needs of the majority of our retail clients and partners.

Our partner business remains an important part of our strategy and we continue to invest heavily in our relationships with key partners and introducing brokers. We are very deliberate about who we want to partner with; we want to allocate our time and resources to a select group of quality partners that have a strong proposition in their individual markets and are committed to building their business.

The good news is that our strategy is paying off – the volume from our partnership business increased 40% last year while we were able to reduce our referral fees on a per million basis by close to a third. Additionally, we continue to see diversification of products traded by our partners as they are now leveraging the broadened product offering mentioned above.

All in all, we are happy with our 2015 accomplishments and financial results.  We generated $81 million of Adjusted EBITDA on record revenues of $435 million last year and are looking forward to an even better year in 2016.

LR: And what does the year ahead at GAIN Capital hold?

Glenn: We’ll be introducing product and service enhancements to our City Index and customers throughout the year. In addition to rolling out an enhanced Advantage Trader platform suite to our customers later this year, we’ll be launching a new website in the next few months, which will offer a significantly upgraded experience.

We’re also focused on expanding the advice and decision support capabilities we offer to our clients. This includes building out our service for high net worth clients, leveraging our advisory offering from Galvan Research, the CFD advisory we acquired in late 2014, and making it available to our City Index and clients around the world, as well as delivering some new, unique decision support tools designed to help our clients identify trading opportunities.

On the partnership side, we’re adding new capabilities to support our growing IB network as well as enhancing our Liquidity API for clients. We have a very robust, capital efficient liquidity solution, not only for FX and Indices, but also for the wide range of CFD products that we support.  In particular, we have seen a marked increase in interest for our liquidity solutions for Equity CFDs and Spread bets.

Of course, it’s not just our retail business that we are focused on growing. We have two other strong businesses: our institutional offering, GTX, and our futures business. GTX is now a $35 million business and has strong momentum. Our Futures business grew 27% last year to deliver over $45 million of revenue. In fact, it was in part due to the strong results of these newer businesses that we introduced segment reporting in Q4. We wanted to offer a comprehensive picture of the results and profitability of each of our three businesses on a stand-alone basis – we think the greater transparency provides a more accurate representation of the value of the enterprise.

On the cost side, we’re capturing the expected synergies from the City Index acquisition as well as making progress on other efforts to lower our fixed operating expenses. Overall, we are on track to achieve the goal set a year ago of reducing our run rate operating expenses by $45 million by the end of 2016, which will help us achieve our goal of 30% operating margins in 2016.

LR: You recently announced the launch of an international payments business, which seems quite different to your base FX trading business. How did the decision to launch come about?

ForeignExchange dot comGlenn: We are always looking to evolve and diversify our product portfolio. With our deep experience operating a highly regulated business that deals with cross border funding and our expertise in developing web-based products and services, we felt offering an international payment service was a natural fit for GAIN. It’s a competitive space but we believe there is room in the market for a strong brand that is backed by a respected pioneer in forex trading that can offer the benefit of a successful track record in currency exchange with the assurance of a strong, transparent balance sheet and a listing on the New York Stock Exchange.

LR: The Retail Forex industry has seen a lot of change over the past year. Looking forward, what do you see in your crystal ball? More industry consolidation, or renewed startup activity?

Glenn: As we’ve said many times before, we believe there will continue to be a flight to quality, with retail investors increasingly gravitating towards the brokerages that uphold the highest industry standards. Also, in the retail FX and CFD industry, scale is becoming more important due to factors such as higher fixed operating costs as a result of ever expanding regulation, increased capital requirements and the importance of having a robust liquidity network, as well as the risk management expertise to support clients in all types of market conditions. Those firms without the necessary scale are finding it increasingly difficult to compete in key markets.

An extreme example of this is in the US market, where due to the high capital requirements we’re down to less than a handful of providers offering retail FX, from well over a dozen just a few years ago. We believe that companies that have scale and the ability to operate successfully in highly regulated environments are best positioned for long-term success.

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