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GAIN Capital Targets 50% Revenues from Non-Retail Trading

Just a couple of days ago, US financial giant GAIN Capital, the group behind FX broker, announced a set of strong metrics for the third quarter of 2013. In the conference call  following the release of the results, GAIN's chief executive officer Glenn Stevens and chief financial officer Jason Emerson elaborated on the factors behind the successful performance, but also offered some insights into the group's future plans and strategic perspectives.



The Mixture and the Forecast


Perhaps you're aware that for several quarters in a row GAIN has been pursuing the three pillars approach: the diversification of business across retail, institutional and exchange-based trading. This approach was the main theme of what Stevens and Emerson said. More interestingly, GAIN's chief executive outlined a long-term goal for the contribution of each of these segments to the company's earnings. While commission-based business accounted for 21% of revenues in the third quarter, Stevens said that in the short term the group aims to raise this to 30% and even to 50% in the long term.


Let's explore the rationale for such a plan.


Retail Trading


Retail (over-the-counter) trading has formed the bulk of GAIN's business for many years: in 2011 accounted for 97% of all revenues. And there's nothing surprising about this fact: after all, as Glenn Stevens put it, retail trading continues to offer some good margins, growth, it has the potential to win more market share and let's not forget the embedded variability. Moreover, the retail market fueled the earnings of the company in the third quarter. 


The tight regulations in the United States play in favor of GAIN's growth in this industry, as many small players feel squashed by the rules. Stevens noted that many small retail Forex brokers would benefit from the shield that GAIN has to offer.


However, the issue at stake here is the sustainability of income from this segment – it is generating money for the broker in times of high volatility but the other two pillars were in fact added to the strategy because GAIN wanted to act against effects of lower FX volatility.



Institutional Trading


Since 2011, GAIN has made moves to propel its non-retail trading business and the efforts have been successful as in 2012 the clientele of GTX platform grew substantially. Volume at the latter rose more than twofold to $2 trillion and revenue nearly tripled to $12 million. 


The company has been keen to capitalize on the edge that institutional trading has: although it's harder to attract institutional traders, they also tend to form a dedicated customer base that sticks along with a given business. This is why GAIN is seeking a share of these sticky revenues and has made a vital step in this direction with the acquisition of GFT. The effects of the deal on revenues have yet to be felt as the data for the third quarter of 2013 concerned only four days of GFT's operations within GAIN. 


Given the successful completion of this deal, Stevens did not deny the possibility of future acquisitions in this segment.



Exchange-based Trading


Although GAIN's management is optimistic on the future of Forex business and expects improvement in trading conditions in general, the company keeps its options open and aims to diversify into non-FX trading too. For that matter, we should recall the acquisition of futures brokerage Open E Cry (OEC) in June 2012. Stevens was adamant that the company would continue to pursue opportunities in the areas concerning any interest rate driven products.



About GAIN Capital


GAIN Capital Holdings, Inc. (NYSE: GCAP) is a global provider of online trading services. GAIN's innovative trading technology provides market access and highly automated trade execution services across multiple asset classes to a diverse client base of retail and institutional investors.


GAIN's businesses include, which provides retail traders around the world access to a variety of global OTC financial markets, including forex, precious metals and CFDs on commodities and indices; GTX, a fully independent FX ECN for hedge funds and institutions; OEC, an innovative online futures broker; and GAIN Securities, Inc. (member FINRA/SIPC), a licensed U.S. broker-dealer.


GAIN Capital is headquartered in Bedminster, New Jersey, with a global presence across North America, Europe and the Asia Pacific regions.  For further company information, visit

TAGS: gain capital  gain capital ceo  glenn stevens  gain capital results  retail forex  institutional trading broker  commission-based business  revenues 

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