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FXCM expects its US exit to trigger international growth

A couple of days after the news about FXCM [NASDAQ:FXCM] leaving US forex market and selling its client base to peer Gain Capital broke, the top forex broker announced key metrics for the nine months, ended 30 September, 2016. According to the data disclosed, FXCM generated a net loss of $13.9 million for the period under review, so the broker expects substantial cost savings form its exit from the US market.

 

Furthermore, the report shows that FXCM’s consolidated net income for the nine months, ended 30 September, 2016 amounted to $126 million. Accordingly, if we exclude the US cost-generating business, the broker’s financial results would have amounted to nearly $140 million.

 

In a note to investors FXCM explains that none of these costs will be transferred to Gain Capital. It further reassures its clients that even without its US customers, FXCM remains one of the largest global retail forex brokers, and expects continued profitability and global growth.

 

Previous week it became clear that the largest US forex broker is withdrawing from the US market after a settlement reached with regulators CFTC and NFA and a $7 million fine for violation of certain legal regulations and false statements filed the authorities. Besides, it was announced that FXCM is selling its retail client base to US peer Gain Capital Holdings Inc (NYSE:GCAP), and the latter will pay up to $500 for each FXCM client.

 

FXCM announced the proceeds from the account sale and the release of capital (approximately $52 million in capital) will go toward the further repaying of the loan from Leucadia National Corporation. The brokerage drew a $300 million loan from the lender to cover clients' losses and meet the minimum capital requirements after the Swiss franc spike in January 2015. In order to repay this debt (with high punitive rate of interest), FXCM had to sell two of its subsidiaries - FXCM Japan Securities and FXCM Asia (aka FXCM Hong Kong) - to Japanese company Rakuten Securities. In October 2016, it also sold its news and research portal DailyFX to IG Group (LON:IGG) for $40 million and more than half of the debt to Leucadia is repaid.

 

It is 50.1% majority owned by FXCM Inc., while rest of the group moved to the hands of Leucadia National Corporation earlier in 2016.

The broker still has its regulated forex businesses in the UK and across the major EU markets Germany, Italy and France, Australia, Israel and South Africa, as well as in Hong Kong, New Zealand, Japan. The broker offers forex, CFDs, and spread betting services.

TAGS: FXCM  US  CFTC  financial results  Gain Capital 

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