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And the figures are much lower than previously estimated
With the recent issuing of its 2010 Annual Report, Saxo Bank has, for the first time, given us a glimpse at its monthly trading volume figures. Saxo reported that its average monthly trading volume in the second half of 2010 was $232 billion (DKK 1.3 trillion), down about 17% from $278 billion (DKK 1.7 trillion) in the first half of the year.
We had earlier reported that Saxo Bank’s revenues declined by 37% from first to second half 2010. (We also had estimated Saxo Bank’s monthly volume at $309 billion, based on revenue figures, well above the actual numbers).
What does this all mean? We draw a few conclusions:
- It pays to be a European broker. Overall, the European online trading business is much more lucrative than in the US. For example, we now know that Saxo Bank earns about 3.1 pips per (round-trip) volume, versus just 2.2 pips for FXCM and 2.4 for Gain Capital. Looking at this another way, Saxo and FXCM did almost an identical amount of volume in 2010 – yet Saxo’s 2010 revenues from trading activities were $475 million, while FXCM’s were just $346 million.
- More competition. Both overall volume, as well as revenue-per-volume, fell dramatically in the second half of 2010 – in Saxo’s case, a 17% decline in volumes resulted in a 37% decline in revenues. If this discrepancy was a result of less volatility in the second half of 2010, then we can assume that a rise in volatility (as we’re seeing in the first quarter of 2011) should see a return to former revenue and profitability levels. However, if increased competition is causing revenues-per-trade to fall, then we can expect the trend to continue.