US Retail FX client assets drop to multi-year lows


Well, the regulators have done it.

After several years of (over-)regulation of the forex and futures industry in the US, cutting allowed leverage for traders and making it prohibitively expensive for all but the largest brokers to operate, US retail FX trading has dropped to a multi-year low.

CFTC filings show that assets held by US retail traders fell to $595 million in April 2014 – their first-ever reporting below the $600 million level and thus their lowest level since the CFTC began reporting these figures in 2009.

US Retail client assets to Apr2014

The CFTC data really shouldn’t be surprising. Over the past several months we’ve reported on a number of RFEDs and FCMs (US regulatory jargon for regulated retail brokers) selling off their US clients for next to nothing, and leaving the US market. Those include otherwise large-and-successful brokers such as FXDD and Alpari.

In both cases, for example, we understand that the brokers decided that their $20M+ of required regulatory capital could be better deployed elsewhere, in faster growing markets. You can do a lot with $20M in a fast-growing market.

Furthermore, onerous reporting requirements such as daily client segregated cash reports have made it very difficult and expensive to operate in the US, even if you can justify all that parked capital.

The result? Not unexpectedly, reduced US retail FX trading, fewer brokers and less choice and competition for US Forex traders who remain.

We wonder if the remaining few brokers will actually stay in the US, or likewise head for the hills and greener pastures abroad. Those include industry leader FXCM, #2 Oanda and #3 Gain Capital (Forex.com), which between the three of them hold fully two-thirds of US retail FX assets. Compared to virtually anywhere else in the world, that’s a very concentrated market.

US retail FX client assets Apr14

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US Retail FX client assets drop to multi-year lows

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