US forex brokers profitability report for Q4 2011 shows steep drop in number of US accounts amid increase in traders’ profitability

6 Comments
  • Number of forex accounts held with US forex brokers drops by more than 11,000 to all time low of 97,206
  • Clients’ profitability is up 6.4% on average, second consecutive quarter that profitability is improving
  • OANDA is still the most ‘profitable’ broker although just 0.1% above GFT
US retail forex industry is now showing obvious signs of slow down with number of non-discretionary retail forex accounts held with US based reporting brokers down to record 97,206. This is the lowest count reported since Q3 2010 when first such report was released. Reasons can be many but without any doubt extreme regulatory climate has made it extremely difficult for American brokers to attract new clients. In fact only Forex Club and Tradestation have reported growth in number of accounts they hold.

 

American brokers now face very high compliance and regulatory costs on one hand while on the other they are not competitive as leverage, FIFO and hedging requirements forced foreign clients look elsewhere. American traders themselves were forced to either comply with those requirements or simply exit the market (and hopefully for NFA the futures lobby: go back to trading futures). There might be other explanations to this such as seasonal slowdown and relatively low volatility. Brokers may have been moving foreign traders to their foreign subsidiaries – as same trader in a foreign subsidiary is more profitable than in the American one due to the reasons mentioned above. However regulation without any doubt had a huge impact on this industry’s slowdown.

 

FXCM in the past published a study about profitability of traders during low volatility times which may explain the rise in average profitability.

 

OANDA is still the most ‘profitable’ broker with 39% of its clients being profitable in Q4 2011. GFT is just 0.1% with profitability of its clients jumping 13.7%. PFG’s profitability jumped 14.6% and Interbank’s 10.0%. Amazingly profitability of all brokers improved in Q4 2011. Seems that traders in general were happier this quarter.

 

 

Click here to access your latest copy of the Forex Magnates Retail Forex Industry Report.






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6 Comments on this post

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  1. Martin Anderson said:

    Michael, are there any statistics how many active FX-broker accounts exist in the US?

    January 18th, 2012 at 5:02 pm
  2. Michael Greenberg said:

    What do you mean? this is the formal statistics. there are also accounts with Citi, Interactive Brokers and few more – but those don’t report and there’s no way to know. they are not that big in retail fx either.

    January 18th, 2012 at 5:14 pm
  3. Martin Anderson said:

    Ok, thank you Michael. I was surprised by the report, thought US FX retail market is bigger.

    January 19th, 2012 at 2:31 am
  4. Michael Greenberg said:

    we all were… note though that this represents only non-discretionary accounts that traded once in past quarter, total number of accounts including ‘passive’ and discretionary is about 50% higher.

    January 19th, 2012 at 3:14 am
  5. Kyle Waitkunas said:

    So how many brokers are in the US now? I seem to recall reading ’16′ at one point but dont know if thats accurate anymore.

    January 22nd, 2012 at 7:42 pm
  6. Michael Greenberg said:

    depends what you call a broker. it’s all those in this list + Citi, Interactive Brokers, thinkorswim, etc

    January 22nd, 2012 at 8:57 pm

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