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#1 26-12-2018 11:31:00

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Trading volumes have dropped in 2018 in Europe, increased in Australia

Trading volumes have dropped in 2018 in Europe, and increased in Australia

Article posted by financemagnates:

The ranking of top brokers in the forex industry is constantly changing, although, there are certain brokers that consistently dominate the markets. However, the massive regulatory changes to the sector in the European Union (EU) threatened to throw out that balance – so which brokers managed to stay on top?

Well, it is fair to say that EU based brokers or firms with an EU focus were clearly affected by the regulation. However, there was one broker that did manage to maintain its dominance throughout the whole year, despite it being a UK-based firm.

IG Group remains dominant

According to average monthly volumes, IG Group consistently topped every quarter from Q4 of 2017 up until 31 September 2018, and most quarters had a comfortable distance between second place.

On 1 August 2018, the European Securities and Markets Authority (ESMA) introduced rules for contracts for difference (CFD) trading. This included marketing and leverage rules.

As can be expected, this caused most brokers to take a hit in trading volumes and IG was no different, with the third quarter being the lowest quarter for the broker. However, it still managed to average a monthly trading volume of $450 billion. Its most successful period was the first quarter of this year, with an average monthly trading volume of $564 billion.

The rise of Australian brokers

Whilst the regulations within Europe have drastically changed the currency exchange industry, the changes were limited to the region. As a result, during the second and third quarter of 2018, we saw the rise of Australian-based brokers.

One such broker is IC Markets, an Australian-based online forex broker firm. During the fourth quarter of 2017 and the first quarter of this year, IC Markets was in third place in terms of forex trading volume, behind IG Group and Saxo Bank, averaging $275 billion and $319 billion per month in the fourth and first quarter respectively.

However, IC Markets moved up the ladder to second place during Q2 and Q3, beating Saxo Bank, with an average monthly FX trading volume of $399 billion and $428 billion, respectively.

While this coincided with the ban on selling binary options to retail investors in the EU taking effect in the second quarter and the later restrictions on CFDs in the third quarter, whether IC Markets directly benefitted from the regulation is questionable.

Retail investors are looking abroad

However, as has previously reported, many retail investors who previously chose firms within the EU for their investments did look to outside regions where they could choose their own risk, such as Australia.

It is interesting to note that Pepperstone, another reputable Australian broker, experienced an almost identical pattern. In Q4 of 2017 and Q1 of 2018, Pepperstone was in eighth place, averaging $157 billion per month and $206 per month in the fourth and first quarters.

However, in Q2, Pepperstone jumped up to sixth place with an average monthly volume of $209 billion, and in the third quarter made it into the top five with $212 billion. With Pepperstone, it is easier to draw conclusions as to whether the broker benefitted from ESMA, as the firm mostly made its way up the ladder thanks to EU-based firms reporting declines in their forex trading volume, as its average monthly volumes didn’t increase drastically during the two quarters.

EU brokers feel the pain of ESMA regulation

One EU-based broker, in particular, that embodies the pain inflicted on brokers by ESMA, is FXCM, a retail forex broker based in the UK. In terms of trading volumes, FXCM was in fifth place in the final quarter of 2017, with an average monthly trading volume of $194 billion.

In the first quarter of 2018, although FXCM fell down one place on the ladder, its average monthly volume increased to $233 billion. However, it was all downhill from then, slipping to $199 billion in the second quarter and falling down to $174 billion in the third quarter, pushing it down to seventh place.

"Anything worth having is worth going for - all the way." - J.R. Ewing


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