We got a chance to look under the bonnet of two of the leading margin trading providers this week as both Gain Capital and Saxo Bank published their monthly volume figures for September.
Gain Capital, of course, is the owner of City Index here in the UK, but the parent company is listed in New York under the ticker GCAP. Overall Gain’s retail customers traded a total of US$151.50 billion during September that sounds impressive but in fact, that figure reflected a -14% decline in turnover when compared to the month of August.
The same trend is apparent in the daily turnover data too, during September the firm’s average daily turnover was US$7.20 billion compared to US$7.50 billion per day during the previous month.
On the plus side, Gain added to its active client accounts in September with just over 118,000 up from August’s 117,000 but well down on the 129,000 active accounts the firm had back in September 2018.
Perhaps of more concern to shareholders of spread betting broker Gain Capital will be the sharp drop in quarterly income which came in at just US$900,000 compared to US$6.80 million in the same period in 2018.
Unsurprisingly the company’s stock is trading at its recent lows closing at $4.50 down by -6.83% in New York last night. The challenge for Gain it seems, and indeed for many other forex brokers, is to maintain and ideally increase volumes whilst sharply reducing costs, so as to grow the bottom line.
Turning to the figures from Saxo Capital Markets the danish margin trading broker saw its total monthly volume figures dip down to US$223 billion during September versus an impressive US$282 billion during August. Forex trading volumes fell to US$118.60 billion from US$139.10 billion in the prior month.
There was also a sharp reduction in share trading during September, volumes fell to US$53.4 billion in September down from the US$87.40 billion seen in August. there were also modest declines in both fixed income and commodity-related trading
August 2019 was something of an outlier, normally the month is a pretty sedate one. However financial markets saw rising volatility in August this year and exchanges such as the NASDAQ had their busiest month of 2019 to date during August.
Saxo didn’t specifically comment on its profitability in this release but back in August, the group reported a first-half 2019 loss of some US$20.70 million, though the group had added more than 17,000 new accounts in the first half of the year.
September was the first month that the recently acquired Bink Bank rolled out the Saxo trading platform to its dutch clients living in Spain, that number approximately 100,000. It’s this kind of cross-marketing opportunity that futures broker believes will drive growth in the second half of 2019 and beyond.
Overall then it’s difficult to draw too many firm conclusions from the September updates from Gain or Saxo. August 2019 was an unusually busy month in the markets and it was always going to be tough for September to match up to it.
That said neither CFD broker will wish to see volumes and or profitability slip further during October and they will surely look to events such as Brexit, the continuing trade war between the US and China and the possible impeachment of Donald Trump to provide both volatility in the markets and trading opportunities for clients which are of course the key drivers for any brokerage business.
Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.