LeapRate's Daily Forex Industry Newsletter
Join now to receive first access to our EXCLUSIVE reports and updates.
Screenshot of a breaking news alert e-mail from Q2 2017
Gain Capital’s report last week that Retail FX volumes continued to fall in June – despite robust institutional volumes – sent its shares lower, closing Friday at $6.76 per share. Gain shares (NYSE:GCAP) were down 11% for the week and now sit at their lowest level since last August and less than half the value of what they were at their peak above $14 last September.
Gain Capital one year share price graph. Source: Google Finance.
And with Gain’s June volumes report in hand investors didn’t bother to wait for rival FXCM’s June report, due out later this week, selling off FXCM as well. At $13.29 per share, FXCM (NYSE:FXCM) is about 33% below its September peak.
Overseas, UK online trading firm IG Group (LON:IGG) has endured its own selloff, down 12% since February, while former stock market darling Plus500 (LON:PLUS) has shed 37% of its value since topping the charts at £7.00 per share in April.
All this occurring, of course, while equity markets generally continue to test new highs month after month.
It seems as though stock market investors are finally coming to ‘get’ the online brokerages, treating them as essentially defensive stocks – that is, stocks that do well when the rest of the market doesn’t.
Markets hate uncertainty. As such, equity markets generally do well over sustained periods of low volatility, such as we’ve all witnessed in the first half of 2014. But those conditions are poor for online brokers, who thrive on the very volatility traditional equity investors detest.
As far as leveraged trading is concerned, low volatility = low volumes.
Volatility will surely creep back into the markets at some stage. It will be interesting to see if shares of the Retail FX brokers climb back up when equity markets generally begin to retreat.