US discount brokerage firm, TradeKing, reported that its proposed acquisition of GAIN Securities in July, has been approved by the US regulator. TradeKing will formally acquire the assets of GAIN Securities in October, financial details of the merger have yet to be made public.
After an emphatic week of volatility in GAIN Capital’s share price, today’s news has had a positive impact, the stock crossed a new high at 10.50, and is trading at 9.95 up by 0.27 (2.79%) to close on the day.
“The professionals at GAIN Securities have been terrific partners in this process, making every effort to ensure a smooth and easy transition for clients,” said David Dusseault, TradeKing’s Vice President of Client Services and Brokerage Operations, in a statement. “We are all committed to providing the very best experience for these clients, with the goal of exceeding their expectations every step of the way.”
“We’re delighted to have secured FINRA approval and now can begin the process of delivering on what we’ve promised the GAIN Securities clients – an outstanding brokerage experience at a tremendous value,” said TradeKing Group CEO, Don Montanaro in a comment to the media. “There are a number of features in our offering, including a vast array of trading tools and top-notch mobile apps, that will represent a significant improvement for these clients, so we’re eager to make those features, and more available to them.”
The TradeKing acquisition is somewhat of a ‘situational irony’ for GAIN Capital, the parent firm that owns GAIN Securities. Over the last few years, GAIN Capital has been involved in several high- level takeover deals of other financial services firms, which include:
- FX Solutions
- CMS Forex
The tables have finally turned for GAIN, who blew off FXCM’s proposed merger earlier this year, with the release of its equities division. GAIN Securities offers a range of instruments with direct access to listed US equity securities, including stocks, exchange traded funds, or ETFs, options, mutual funds and bonds. In GAIN Capital’s last annual report, the firm confirmed that the equities brokerage segment of this business was not as profitable as other areas, it states: “GAIN Securities generally generates a lower profit margin than that which we have historically experienced in our retail forex trading business.”
Retail participation in the world’s most liquid equities market, the US, has been on the decline over the last decade. US investors have weathered the dot-com storm reasonably well, however the ongoing crisis, post-Iraq war, where the dollar tumbled and then the great recession of 2008, which had a negative impact in share ownership. According to data provided by the United States Investment Company Institute, inflows into equities have declined by $3 trillion since 2002. Investors have been loyal to financial markets with increases in mutual funds and ETFs however, the market has certainly been suffering.
Its not common for FX and CFD brokers to offer listed instruments on exchanges, arch rival FXCM offers equities trading after it took over full operation of ODL Securities, that was licensed to offer OTC and listed products and was a member of several exchanges.
Approval by FINRA is mandatory when broker dealers carry out an M&A, according to details on FINRA’s website, they state: “Firms are encouraged and, in some cases may be required, to notify FINRA when planning organizational or operational changes. Firms should discuss the planned transaction with their FINRA Coordinator. Discussing these proposals with FINRA well in advance of implementation, may help firms address operational problems.”
TradeKing will offer GAIN Securities’ clients a range of useful products, low cost training and new avenues to communicate using social media. Notably, GAIN Securities’ traders will benefit from a 28% reduction in trading fees. GAIN Securities offers share trading at $6.99 for online transactions. TradeKing offers reduced figures at $4.95.
Through the acquisition, TradeKing gains closer in its bid to compete with larger players in the market, such as, Charles Schwab (SCHW), Fidelity, E*Trade Financial (ETFC), TD Ameritrade (AMTD) and Scottrade.