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FXCM Releases November 2012 Metrics; Low Volatility Doesn't Explain Low Volumes Any More

Dec 18 2012

Yesterday FXCM, one of the major players on the retail and institutional forex markets, released its metrics for November 2012. I feel tempted to give you all the boring details but… Wait, there is no “but”: I will give you the boring details. 

When it comes to the broker’s retail business, things are not really dreadful, see for yourself:
- Retail customer trading volume of $305 billion in November 2012, 6% lower than October 2012 and 11% lower than November 2011.
- Average retail customer trading volume per day of $13.9 billion in November 2012, 1% lower than October 2012 and 11% lower than November 2011.
- An average of 353,983 retail client trades per day in November 2012, 4% higher than October 2012 and 22% lower than November 2011.
- Tradable accounts of 203,495 as of November 30, 2012, a decrease of 219, or 0.11% from October 2012, and an increase of 10,723, or 6%, from November 2011.
The institutional business has taken a bigger hit:
- Institutional customer trading volume of $90 billion in November 2012, 68% higher than October 2012 and 41% lower than November 2011.
- Average institutional trading volume per day of $4.1 billion in November 2012, 76% higher than October 2012 and 41% lower than November 2011.
- An average of 9,837 institutional client trades per day in November 2012, 68% higher than October 2012 and 67% lower than November 2011.
Volumes are dropping worldwide, and all brokers – including FXCM – are affected; no surprises here. However, there is something that really bothers me in this whole scheme. The number of active tradable accounts held with FXCM is increasing, and so are the deposit amounts. At the same time, the number of transactions concluded in November 2012 is 22% lower than in November 2011. Naturally, this leads to an 11% decrease in the overall trading volumes.  
So far, so good. We have seen this happen with other brokers as well, and they have all been blaming it on the low market volatility. I took the time to put together a little graph* of how volatility and trading volumes compare and I was expecting to see a strong correlation between the two parameters. Boy, was I surprised when I saw this: 
As you can see, the line of the volumes remains pretty flat compared to the volatility one, which jumps up and down at its liking. Take the month of October, for example: in 2011, the volatility was 1100 pips and the trading volume - $339 billion; in October 2012, the volatility was 334.6 pips, approximately three times lower, and the trading volumes - $324 billion. Go figure. 
I will be honest with you: I tried to spin the data from every possible angle to figure out why this is happening, and yet I couldn’t find a plausible explanation – so I will leave the conclusions to you. 
*Graph data is derived from and FXCM. 

About FXCM Inc.

FXCM Inc. (NYSE: FXCM) is a global online provider of foreign exchange (forex) trading and related services to retail and institutional customers world-wide.
At the heart of FXCM's client offering is No Dealing Desk forex trading. Clients benefit from FXCM's large network of forex liquidity providers enabling FXCM to offer competitive spreads on major currency pairs. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. FXCM's U.K. subsidiary, Forex Capital Markets Limited, also offers CFD products with no re-quote trading and allows clients to trade oil, gold, silver and stock indices along with forex on one platform. In addition, FXCM offers educational courses on forex trading and provides free news and market research through
TAGS: FXCM  forex trading  forex metrics  trading volumes  retail forex  institutional forex  market volatility 

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