LeapRate’s Forex industry predictions for 2015

Earlier this week we reviewed some of the top moments that the Forex industry experienced in 2014. It was certainly interesting to take a walk down memory lane, but now with the turn of the calendar to 2015 we’d like to turn our focus forward to the next 12 months.

First, some background.

The forex sector is looking toward 2015 with a certain amount of optimism. After a very slow first half of 2014, trading volumes picked up to record levels during the second half of the year. And the volatility which drove that growth in volumes continues. Publicly traded brokers are (generally) rising in value. The industry continues to grow internationally.

There are a lot of good reasons to be optimistic about what 2015 has to offer to the Forex sector.

And so, here are our top predictions for the industry for 2015. Do you agree?

1. More IPOs. Since FXCM Inc (NYSE:FXCM) and Gain Capital Holdings Inc (NYSE:GCAP) went public within a couple weeks of each other in late 2010, there have been no forex broker IPOs save for the mid-2013 offerings of Plus500 Ltd (LON:PLUS) in London and KVB Kunlun Financial Group Ltd (HKG:8077) in Hong Kong. All four of those offerings can be viewed as successful – all but Gain Capital are trading well above their IPO prices, and Gain isn’t far behind. We’re also seeing all-time or multi-year share price highs being set by IG Group Holdings plc (LON:IGG) and Interactive Brokers Group, Inc. (NASDAQ:IBKR). Companies which serve the industry, such as payments company SafeCharge International Group Ltd (LON:SCH) which went public in March, have also seen their share prices rise nicely.

With equity markets generally at all-time highs, providing a healthy environment for IPOs, we expect a number of both top and mid-tier forex brokers to look at going public very seriously in early 2015. We have already begun to see some movement in that regard, with IronFX already making its preliminary IPO filing with the SEC in the United States.

The reasons to go public vary from company to company, but essentially include:

  • access to capital, increasingly important as the industry consolidates (more on that below).
  • profile – in attracting new clients and traders, it doesn’t hurt to say ‘…and we’re a publicly traded company’.
  • liquidity for shareholders – if you’re a shareholder of a forex broker, why wait for dividends when you can sell (some of) your shares for millions of dollars.

2. More consolidation. While some firms will raise capital and grow, others will be acquired. This is a natural phenomenon we see in many maturing industries. Some of the notable acquisitions we saw in 2014 included Gain Capital buying City Index for $118 million shaking up the clubby UK online trading market, and FXCM’s purchase of FXDD USA as well as IBFX’s US and Australia MT4 business. We also saw London Capital Group change hands,

Our expectations for 2015 is even more forex industry consolidation. Our thesis? Spreads are dropping, new clients are becoming harder and more expensive to come by, and traders are becoming choosier. In summary, the industry is maturing. And as any good M&A banker will tell you, maturing industries beget consolidation.

3. Website looks will change. Drastically. In an industry which supposedly is on the cutting edge of client acquisition and retention technology, as well as embracing of change, the GUIs of most forex brokers remain very old-school. We still see the standard ‘real account’ and ‘demo account’ buttons prominent on broker home pages, alongside a small currency rates table and bullet points touting the particular broker’s unique appeal.

That will change.

We expect that 365 days from now brokers’ home pages and key landing pages will be a lot more visual, if not video oriented, with a lot less writing and other ‘stuff’ distracting visitors from the key action items of open-an-account or try-us-for-30-days. A very good example is the makeover recently unveiled by EXNESS.

EXNESS home page

EXNESS’ new home page. The forex broker website of the future.

4. More innovative marketing. Despite the Forex industry’s continued growth over the past six months, the sector is becoming more saturated and client acquisition costs are rising, at least in traditional media where brokers have been acquiring clients. New clients are becoming more difficult and expensive to attain.

We expect to see more innovative and varied marketing and client acquisition campaigns in 2015. Everything from expanded sports sponsorships, an increasing favorite among leading retail forex brokers, to trading contests and creative bonus programs.

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