LeapRate Exclusive… LeapRate has learned that FCA-regulated retail forex broker TradeNext has decided to terminate, at least for the time being, its business dealings with retail clients. It is in the process of returning all funds to its entire retail client base, and is not executing trades in the interim.
Certain other reports had been circulating that TradeNext was terminating some clients as part of a greater strategy review. However LeapRate has learned from sources close to the company and from clients of the company that the changes at TradeNext are indeed much more pervasive.
Why is TradeNext doing this?
We believe that the SNB crisis is at least partly to blame, as well as losses the company has continued to incur as the cost of marketing has increased substantially since January’s SNB crisis.
Having taken some losses early on in the year due to the surprise spike in the value of the CHF, as did many other retail forex brokers, TradeNext apparently also had a fairly poor April-June quarter. The company lost money on some campaigns which did not work out as planned, as well as from some predatory activity and arbitraging by clients which also left the company in the red.
With its business not really making money and a fairly substantial monthly spend with a large staff, London offices to maintain and the costs associated with being an FCA regulated entity, apparently TradeNext decided to return all retail client money and to halt its retail business. The return of client funds reduces the amount of regulatory capital required in the business.
In its most recently reported financial statements for the Fiscal 2014 year (TradeNext has a March 31 year-end), TradeNext sustained a loss of £1.1 million.
A company spokesperson contacted on the matter noted to LeapRate that:
TradeNext is conducting an internal review and assessment of its current products & services and during this process is not offering trade execution services.
Matching its cut in business, TradeNext also cut staff. The exact amount of staff cuts is unknown.
A copy of messages sent to TradeNext clients back in mid August reached LeapRate and appears as follows:
LeapRate had reported back in July that a number of former TradeNext executives had left to launch a new London based FX brokerage called Elxi Markets. Elxi was co-founded by Ali Homadi, an Emerati investor based in Dubai who is Managing Director of the Homadi Group of Companies who provided the investment capital to establish Elxi Markets. Jason Gibson, who spent a year as Head of Trading and Sales at TradeNext after stints at ETX Capital and AxiTrader UK, is the other co-founder and CEO of Elxi.