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Retail FX poised for further growth in Asia, says Aite Group

Aite Group identified demographic trends, internet penetration and potential returns in financial turmoil as the key drivers for the strong performance of retail platforms

The retail foreign exchange market will maintain its growth trajectory for the next 10 to 15 years, with the US market expected to reach 4.8 million trading accounts by 2020, according to a report published on May 17 by Boston-based research and advisory firm Aite Group.

In the 71-page report, Retail FX traders: pilgrims to the land of high returns, Aite Group’s senior analyst Javier Paz said demographic trends, internet penetration and the response to financial turmoil will attract new retail investors to FX as it offers the best potential returns as an asset class.

Half of the retail FX market is located in Asia, according to Aite, and the Japanese market has grown by an annual average of 797,000 new trading accounts for the past four years. Aite believes the retail market is set to become even more Asia-centric over the next decade.

“A once-in-a-generation opportunity to market retail FX to a vast group of prospects aged 30 to 55 will exist in the Middle East, Asia and Latin America through to 2020. Asian traders might not offer the highest average account sizes, but make up for that in numbers,” Paz said.

The report also highlighted the estimated increase in the number of retail FX traders globally, which it attributed partly to the growth seen by major retail brokers, including FXCM and Gain Capital, which both announced their financial results last week.

FXCM reported a $2.8 million profit for the first quarter on May 16, while Gain Capital revealed it had achieved a quarterly trading volume of $512.5 billion in the first quarter. Gain reported significant growth in traded retail accounts, funded retail accounts and client assets, up 18%, 32% and 34% respectively.
On May 13, Gain Capital completed its acquisition of the dbFX retail trading platform from Deutsche Bank, which was announced on April 21. The acquisition has provided the broker with an extra $55 million in client assets and approximately 1,650 clients.

According to Glenn Stevens, chief executive of Gain Capital in New Jersey, new regulations in the US and Japan have resulted in higher capital requirements and lower leverage for retail firms, which is likely to drive further consolidation in the sector.

“We see increased transparency, consolidation and regulation as the main themes in the retail FX industry. Smaller firms who are already resource-constrained will not be able to meet the requirements and continue to invest in their business. We expect to see more consolidation globally and part of Gain’s corporate development strategy is to leverage our strong balance sheet to selectively pursue acquisition opportunities,” said Glenn Stevens, chief executive at Gain Capital in New Jersey.

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