Retail Forex Brokers: A story of consolidation, regulatory headwinds and global challenges


It is an undeniable fact that the expansion and growth of the online retail forex industry had reached a relentless, unprecedented pace over recent year. Indeed, the introduction of the Euro in 1999 and its pairing with the US dollar rapidly became the most tradable financial instrument the world had ever seen, contributing to the FX market’s daily turnover going from just over half a trillion dollars in 1989 to a massive $5.4 trillion in April of 2013.

However, the more recent trends in the industry paint a much gloomier picture with trading volumes declining as a result of the record low FX volatility that has been recorded. This makes the environment within which online retail forex firms are called to operate highly challenging and has affected all players in the industry, large and small. For the larger, more popular and often publicly listed companies it has meant declines in their business and profit volumes.

For the smaller brokers however it has often been a matter of survival with many not being able to withstand the pressure and being forced to shut down or sell their operations to other brokers. There are strong rumours, if not indications, that in jurisdictions that are not strictly regulated brokers who are facing difficulties and are struggling to survive are even tapping into client deposits in a desperate attempt to keep funding company operations. This is a very alarming prospect and traders should be extra vigilant to safeguard the safety of their funds.

It is certain that from the vast plethora of brokers that has emerged over the years, many will be unable to withstand the current market conditions, which are far from favourable, and will either exit the market or succumb to mergers and acquisitions. Indeed such activity has recently increased, through moves such as the FXDD US based accounts been acquired by FXCM as was also the case with IBFX’s MT4 business. Moreover, in Cyprus JFX‘s business was merged officially into Traders Trust Capital Markets, with the firm renouncing its CySEC authorization.

Against this backdrop, persistent rumours insist that another CySEC licensed broker headquartered in Limassol, which is a well-known CFD and forex broker is faced with cash flows shortage and general financial difficulties that are making it almost impossible for the company to meet even the expenses required for its most basic day to day operations.

We have as yet been unable to confirm the rumours or obtain information which further clarifies the situation. We can, however, fairly safely argue that it will not be a surprising turn of events. Except the overall difficulties in the overarching forex landscape, Cyprus is also facing new troubles as a country as well and firms operating from this jurisdiction are called to cope with that as well. More specifically and after five straight positive reviews of its rescue program from its international lenders , the government is faced with a legal wrangle that will definitely throw a spanner in the country’s fragile recovery triggering the creditors’ disapproval and making it more difficult for Cyprus to get its hands on the next batch of bailout cash it is due to get. The country’s Finance Minister said there’s enough money in state coffers to avoid an imminent crisis, but it is natural that both the government and the business in Cyprus will have another hot potato in their hands for some time to come.