Growth in retail FX brokerage

LMAX Exchange

Little noticed by BIS, retail investment regulators, and the public at large, retail FX volume has surged in the past 10 to 12 years to reach an impressive US$280 billion per day, roughly 6% of the overall FX market and 18% of the spot FX market. This buzzing market grew on the opaque OTC side of the market, with a few hundred FX brokers of various sizes growing their business purely online and with the help of introducing brokers and Web affiliates. While a good number of these specialist brokers only offer spot FX, an increasing number of them promote various forms of FX (spot FX, contracts for difference [CFDs], FX options, and binary options) and have added other asset classes such as equities, commodities, and fixed income products.

David Mercer, LMAX Exchange CEO, shares insights.

Aite Group estimates that the retail FX trading volume CAGR from 2007 to 2017 will be 12.7%, compared with 8.9% for spot FX and 6.3% for overall FX activity. Retail FX has undergone a rapid growth period (2004 to 2008) followed by a higher regulation and consolidation period (2009 to 2012) and is now entering a phase of substantial expansion that will see its 2012 trading volume double by 2017 as the following occurs:

  • FX volatility levels normalize
  • Internet penetration makes online trading available to a vast audience in developing and emerging countries never tapped for any kind of online trading
  • The cost of launching new retail FX brokerage operations continues to fall, and new entrants (some not regulated) spread the online trading concept widely

Historical Retail FX/Spot FX Growth and Medium-Term Outlook

growth-retail-fx-brokerage

Source: BIS, Aite Group ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’, June 2013

Source: Aite Group ‘Global FX Market Update 2013: Increased Market Transparency, More Competition’, June 2013

Video Transcript

Growth in retail FX brokerage

David Mercer, LMAX Exchange CEO comments on the Aite Group report’s prediction of an annual growth rate of 13% for retail FX volumes from a current average of $280 billion per day. This amount is approximately 18% of the daily volumes of the total Spot FX market. David Mercer expects the growth to be driven by increased market access, including additional entrants such as retail money managers, examples of which can be seen in the Asia Pacific region.

Business and Technology   Aite Group   LMAX Exchange  

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