Greenwich retail FX survey numbers (way!) off

Just three weeks ago we chastised the WSJ, the world’s leading financial news source, for running an error prone and obviously negatively-biased “hatchet job” article on retail FX market leader FXCM.

Today we get another WSJ article citing a new Greenwich Associates survey which claims that retail FX firms globally:

  1. do about $720 billion per day in volume, and
  2. saw their volumes increase by roughly 80% (!!) in one year alone, from 2010 to 2011.

While we believe that both the WSJ and Greenwich Associates are normally respected and reliable information sources, we believe that both are way (way, way…) off with these numbers. (Isn’t the WSJ supposed to be at least a little about investigative journalism???).

Let’s deal first with the second point. Clearly, anyone following the retail FX industry (and the Forex ECN sector, which services the retail FX sector, among others) has seen that there was a serious slowdown in the retail FX business in 2011 following several years of steady growth. The combination of low volatility, and increased regulations which lowered trading volumes in two of the world’s three leading markets — the US and Japan — led to an obvious slowdown reported by many if not most market participants in 2011. To claim that the retail FX business grew in aggregate by 80% or so in 2011 is simply preposterous.

And as to the first point — how big is the retail FX industry — a lot depends on definitions (e.g. how do we count financial Forex spreadbetting at UK-based firms), but again we believe the Greenwich numbers are way, way off. Our own survey, in our Forex Industry Report, has the global market at about $185 billion daily, or just one quarter of what Greenwich is reporting. Other similar surveys by firms involved daily in the retail FX market show somewhat similar figures, at most in the $200-300 billion-per-day range. Market leader FXCM does about $18-20 billion per day, and we believe they represent roughly 10% of the global market. The Greenwich survey would put them at just about 2-3%.

For more on the global FX market see the LeapRate Dow Jones Forex Industry Report.

Read Also: