My Forex Feeds

The coming transition of FXCM US retail FX clients to GAIN Capital’s Forex.com brings uncertainty for some services.

Financial visualization platform TradingView seems to be caught a bit off-guard by the latest developments around FXCM Inc (NASDAQ:FXCM), which will later this week see its US retail FX client accounts transferred to Forex.com, the retail FX division of Gain Capital Holdings Inc (NYSE:GCAP).

FinanceFeeds has already informed its readers of the key procedural steps of the transition, as well as of the switch from a particular FXCM service to another Forex.com service. And yet, uncertainties remain, as some companies have to establish connections with a new partner and see how an eventual collaboration will work.

TradingView has informed the users of its services, in particular traders based in the United States, of the coming transition of FXCM US clients to Forex.com. TradingView notes that currently it has a technical integration with FXCM for trading, but does not yet have one with Gain.

On the brighter side, TradingView adds that it is working on enabling such a technical connection as early as possible. The company promises to post updates in its blog regarding the availability.

Trading through FXCM went live on TradingView in August 2016. Effective August 15th, FXCM СFD data became available only to FXCM account holders. Back then, TradingView explained that the situation was due to a request by FXCM and that it could not change it.

Forex.com has specified on its website that FXCM US clients using the Trading Station platform will be transferred to its FOREXTrader platform, whereas MT4 users will be able to continue trading on MT4 with Forex.com but will have to install a new version of the terminal. NinjaTrader has also set up a dedicated FAQ page on its website, advising on the coming transition of US client accounts from FXCM to GAIN Capital’s Forex.com.

The latest announcements from FXCM Inc include a pending change to its name to the humble “Global Brokerage Inc” and some major reshuffle to the board of directors.

Chinese IBs could easily afford to set up as a domestic brokerage in the US, and so could many NFA regulated IBs. This week, the revival of the US retail FX industry is in full swing

Ever since the industry-changing ruling by the Commodity Futures Trading Commission (CFTC) last week in which FXCM, one of the world’s largest and most widely recognized retail FX brokerages, was banned from operating in the United States along with its two senior directors, CEO Drew Niv and Managing Director William Ahdout for trading against its customers for several years whilst purporting to operate an agency execution model.

The removal of FXCM from is very own domestic heartlands has resulted in just two retail OTC FX firms to choose from for most retail customers, those being GAIN Capital, which this week acquired FXCM’s US client base for what FinanceFeeds considers to be pretty much absolutely nothing, and OANDA Corporation, which immediately pounced on the opportunity to attempt to attract FXCM clients by engaging in what can only be considered to be a very tasteless cheap shot by issuing a gloating press release.

As a result, the most highly organized, well regulated and sustainable electronic trading market in the world is left with not much choice of brokerage, yet plenty of astute investors, with the average deposit size in the US being $6600 rather than $3800 in the rest of the world, a much longer customer lifetime value, and a range of retail traders who are loyal, highly financially literate and often have investment portfolios which are designed for long term rewards.

During the past few days, it has become apparent to FinanceFeeds that, in the true form of the extremely rapidly developing dynamic of the electronic trading industry which morphs within a very short time to suit current commercial conditions and circumstances, many introducing brokers around the world are now actively investigating the possibility of establishing a retail FX brokerage in North America.

As the previous decade drew to a close, many retail FX firms with their origins outside of the United States began to weigh up the viability of retaining business here.

The result was a wave of exits from the United States at the turn of this decade by major firms including Alpari, FXSolutions, GFT, IBFX, and ILQ to name a few, as well as vast consolidation with FXCM having bought the client bases of various firms, and GAIN Capital acquiring GFT, meaning that in the space of just three years between 2010 and 2013, the approximately 25 retail OTC FX firms that had operated in America became nine.

Now, it is quite simply dominated by just two domestic companies.

Five years ago, much clamor amassed and it was relatively common to hear conversations by industry executives outside North America as well as those on the retail sales side such as introducing brokers beginning to hail America’s FX business as a dead man walking.

How wrong could this be….

When examining the companies that took the option of leaving the US market post-Dodd Frank Act, they mostly no longer exist anywhere globally. ILQ left the US market with the NFA having administered a $225000 fine and a permanent ban from operating in the Federal United States in July 2014.

One of the main factors which prompted the NFA to probe into the commercial activities of ILQ at the time was that the regulator had serious concerns relating to the corporate structure of the company, as well as the NFA having conducted investigations into the provenance and business activities of a number of the company’s key figures, including the assertion that at the time that the NFA’s investigation began in March 2013, ILQ had approximately 1,300 customer accounts and over $13 million in total customer liabilities.

Nowadays, the firm has a small operation in Australia but is living in the shadows of Invast Global or AxiTrader, both of which have branched into Prime of Prime brokerage, as well as embarked on large scale commercial growth endeavors.

IBFX was banned from the US market in March 2016. The company, which is owned by Japanese giant MONEX Group, was fined $1 million by the CFTC a day before its ban, and OANDA Corporation then acquired its client base that were using the proprietary Tradestation platform – around 2200 traders – and migrated them to OANDA’s fxTrade system.

Previously, IBFX was fined $600,000 as a result of the NFA having found that IBFX used two models to execute its retail FX transactions. One was STP, and the other being a practice known as warehousing.

Warehousing occured whereby IBFX acted as the counterparty for trades whose value was less than the notional volume threshold level lnterbank had established for STP trades. Interbank would aggregate the “warehoused” trades for risk management purposes and earn revenue from the bid/ask spread and from beneficial market moves that the aggregated “warehoused” trades experienced.

For the vast majority of trades, IBFX would warehouse the trades, and for the remainder of trades, IBFX used the STP model, which accounted for a very small percentage of the firm’s trading volume and applied when the contract size was at or over the specific notional volume threshold set by the firm for its warehouse trades.

Under the STP model, after a customer clicked on the bid or offer price, which included lnterbank’s predefined markup, IBFX would fill the customer’s order but only after the firm had filled the offsetting position (contra-fill) with a liquidity provider.

Less than two years later, IBFX sold its MetaTrader 4 client base to FXCM for $4.4 million, before this year leaving the US altogether.

Strength and business ethic in the land of the free

Capitalization and execution are cornerstones of the American FX industry’s pedigree and quite simply, time has shown that those that cannot cut it in America, have been unable to do so throughout their business operations anywhere globally.

It was convenient to blame the inability to operate on over zealous regulation, or a net capital adequacy requirement of $20 million, however the US giants that remain do not find this difficult at all. Even FXCM, which was exposed to a vast and unexpected surge of volatility when the Swiss National Bank removed the 1.20 peg on the EUR CHF pair in January 2015, was not called up on its execution methodology, commercial leadership or capitalization.

Meeting with CEO Drew Niv a year ago in New York, FinanceFeeds gained perspective on this, with Mr. Niv explaining ““If you look at FXCM today, it is effectively the same company as prior to January 15 2015. Most of our customers stayed, almost all of the staff stayed. We did sell some non-core assets and for a few months we had some losses, however we kept the market share in tact. What many people don’t realize is that we effectively plugged the capital shortfall with Leucadia’s loan.”

In terms of actual impact on the business as a result of attrition, Mr. Niv explained “The customers that we lost were mainly some of the large customers. The total number of our clients that were actually affected by the market volatility that followed the SNB’s decision approximately 3,000 customers which comprised of around 200 here in the United States, and the rest were overseas.

This is a small amount, especially when bearing in mind that some were inactive customers. There were also some customers which stayed with FXCM but deposited less funds because, for example, they were happy to continue trading but would prefer to hold $50,000 in the company rather than $1 million.”

It is now over for FXCM, in all global markets. Just this week, Drew Niv and Brandon Mulvihill were struck off as directors of the British division of the firm, and its global reputation is in tatters.

This has created a massive gulf between introducing brokers, many of whom across the world provided vast business to FXCM, not only in the domestic market, but also from mainland China, where FXCM has been a massive force across the second tier development towns with large IB networks for several years.

From Shenzhen to Zhengzhou, FXCM dominated, being the darling of the introducing brokers and portfolio managers that have over $300 million in assets under management, trading via MAM accounts the liquid capital of property investors with tens of millions locked up in illiquid real estate, who want to trade liquid spot FX with the several hundred thousand dollars of secure monthly revenues.

These IBs could very easily stump up $20 million in regulatory capital, and become NFA members, with an office in the United States and full regulatory reporting systems and personnel in place.

$20 million to a Chinese IB with a large client portfolio and 100 staff is a drop in the ocean, and in a nation in which trust is all, the Chinese IBs could have their very own US based brokerage and send client capital to it without concern. To demonstrate how small the cost of becoming a brokerage is requires a visit to a few second tier Chinese towns where modest, extremely astute IBs meet with brokers and explan that they would need to test the system when forging a new relationship. It is quite common to be asked by a broker as to how much the Chinese IB would like to deposit to test the system. The answer, in many cases is “About $250.” This means $250 million!

The key here is that America’s commercial structure is highly refined. Its leaders are career professionals who have enthusiasm for continuing to further the cause of what is, even at retail level, a massively institutionalized business.

This provides an opportunity for many US based NFA regulated IBs to also evolve toward becoming a brokerage in their own right. Many prime brokerages have this week received serious enquiries from IBs in America about taking a price feed, as the interest from American IBs in becoming a brokerage grows rapidly.

When interacting with America’s senior level FX industry professionals on both the exchange traded FX side and the OTC side, it is clear that the surge forward technologically and commercially today is in full swing.

Now let’s see if Donald Trump’s plan to repeal the Dodd Frank Act materializes. If it does, it will clear the way in some respects, but due to the extremely self-regulating and comprehensive knowledge and professionalism among US market participants, the structure will remain among the highest in the world.

FinanceFeeds would very much like to see a revival of the North American retail FX industry by worthy companies at this opportune time.

FXCM’s towering global presence and customer loyalty makes it one of the largest FX firms in the world, however its market capitalization is small compared to the British and North American establishment. We take a look at the facts and figures and why this is important

FXCM is often cited as being one of the world’s largest FX brokerages, and in terms of the size of its client base, global reach and total amount of retail FX obligation, that is an absolutely appropriate accolade, however in terms of its value as an organization, several large firms have much more fiscal clout.

The publicly listed electronic trading companies are often the longest established and most well-recognized, and are also subject to continual public reporting to regulatory authorities and the respective stock exchanges upon which their shares are listed.

This creates a monthly competition in terms of corporate revenues and generates a sort of unofficial league table upon which the strength of each brokerage can be measured against its publicly listed peers.

It is important to consider that the volume figures that are reported by all brokerages are often not a measure of corporate performance, as there are many ways to provide such information, and whilst it is an obligation for publicly listed FX firms to report their revenues, expenses and operating capital just as any other company in any other industry sector would so that the balance sheet is transparent, the volumes are not a requirement and often, as recently pointed out in a report by FinanceFeeds, must not be taken literally.

It is clear that in today’s environment, consolidation of brokerages in all regions is likely to be on the agenda as a natural progression from a crowded retail FX sector with many similar products being offered by similar brokerages, thus strengthening by acquisition is often the case once this stage is reached, rather like North America’s retail banking business, in which 37 banks have become 4 since 1996.

Let us take a look at a hypothetical scenario, and then place the figures on it to bring it into an exercise in calculation of potential gain.

FXCM, which was established in New York in 1999, having been co-founded by current CEO Drew Niv, one of the most astute senior executives in this entire industry, is a publicly listed stalwart, with offices in many important locations globally, and a vast, wide-reaching client base of loyal customers.

Strength and pedigree among peers

During the early part of this decade, FXCM embarked on an acquisition spree, buying specialist technology provider Faros Trading, a company that provides intelligence, market coverage, and execution services.

$15.6 million in November 2013, 50% of institutional FX market maker Lucid Markets in June 2012 for $176 million at which point Lucid Markets CEO Matthew Wilhelm joined FXCM as a board director. He subsequently began selling FXCM stock, cashing out over $12.1 million worht in just two years.

The company then purchased the MetaTrader 4 retail client base from IBFX in September 2014 for $4.4 million, and then in a joint deal with Saxo Bank, FXCM participated in the acquisition of CitiFX Pro’s client base – that being a $30 billion per month institutional margin FX business when Citi dumped its non-bank efforts.

Back in 2013, FXCM proposed to purchase GAIN Capital, which was withdrawn in the spring of that year, however this shows its ability to make large scale purchases of serious competitors.

Just six years ago, FXCM’s acquisition of ODL Group made it the world’s largest brokerage.

FXCM still owns 32% of FX electronic communication network (ECN) FastMatch, operated by CEO Dmitri Galinov, which operates a matching engine to operate spot FX and metals from the Equinix NY4 facility; and a matching engine that enables European clients to access real time quotes and trade information. The company serves retail brokers, institutions, banks, hedge funds, and proprietary trading firms in the United States and Europe, has presence in London with a further matching engine, and is a highly profitable business.

Then came the Swiss National Bank’s sudden decision to remove the 1.20 peg on the EURCHF pair, exposing many firms, including FXCM, to negative client balances. FXCM took a $300 million loan from Leucadia, and its stock prices languished at less than a dollar for over six months.

In December last year, FinanceFeeds met FXCM CEO Drew Niv at his office in New York, and at that time only 15 months had passed since the removal of the EURCHF pair by the Swiss National Bank, however FXCM as a corporate structure remained a bastion of stability, almost completely intact (aside from the sale of some non-core assets such as Faros Trading to Leucadia’s Jeffries), and looked forward to as strong a future as it did prior to the event which caused so much commercial devastation to many firms.

At that time, Mr. Niv spoke candidly about how he so effortlessly steered the company through this extreme event with such aplomb that the company remains as it was in terms of volumes, client base, staff and commercial strength.

Mr. Niv explained to FinanceFeeds “If you look at FXCM today, it is effectively the same company as prior to January 15 2015. Most of our customers stayed, almost all of the staff stayed. We did sell some non-core assets and for a few months we had some losses, however we kept the market share in tact. What many people don’t realize is that we effectively plugged the capital shortfall with Leucadia’s loan.”

Market Cap of $50 million is far smaller than very quiet competitors, but reach and customer base is gigantic and loyal

In terms of actual impact on the business as a result of attrition, Mr. Niv explained “The customers that we lost were mainly some of the large customers. The total number of our clients that were actually affected by the market volatility that followed the SNB’s decision approximately 3,000 customers which comprised of around 200 here in the United States, and the rest were overseas.

Mr. Niv said “This is a small amount, especially when bearing in mind that some were inactive customers. There were also some customers which stayed with FXCM but deposited less funds because, for example, they were happy to continue trading but would prefer to hold $50,000 in the company rather than $1 million.”

This is significant and of great importance to bear in mind, because when looking at the size of FXCM by comparison to its actual market capitalization and commercial value, there is a very interesting point.

FXCM’s market capitalization is only $50 million. This is actually very small compared to many other FX firms in America and Britain, yet the actual corporate figures are vast.

In the US, the National Futures Association (NFA) requires all Forex dealers to maintain $20 million in net capital. FXCM maintains $53 million. It states its net capital adequacy requirement at $32,316,861, therefore is more than $20 million in the clear as far as regulatory capital is concerned.

The company has a total of $182 million in retail FX obligation, that being the metric which represents the total amount of funds at an American retail FX dealer that would be obtained by combining all money, securities and property deposited by a retail forex customer into a retail forex account or accounts, adjusted for the realized and unrealized net profit or loss. It is also FinanceFeeds understanding from detailed research that FXCM’s customer service is one of the best in the business.

Even in China, a completely closed market, FXCM is one of the most favored firms by Introducing Brokers (IBs) in second tier cities from Shenzhen to Zhengzhou, and Guangdong to Chengdu that are producing over 100,000 lots per month in volume from palatial offices that resemble those of a large brokerage firm in its own right. When asked if they would consider moving away from FXCM, the unanimous answer is no.

Nobody likes to talk about the money they owe to a creditor, however Mr. Niv’s open and concise explanation goes hand in hand with his remarkable acumen. He summarized the current position at the time of our meeting in December last year in that “$117 million has already been paid, and the entire balance will be completely paid.”

FXCM during 2015 disposed of further non core assets including the sales of the equity trading business of FXCM Securities Limited, FXCM Asia Limited, FXCM Japan Securities, Co., Ltd., and the operations of Faros.

FXCM continues to explore opportunities for the sale of additional non-core assets, including Lucid, V3 and its equity interest in FastMatch, Inc however it is possible that FastMatch will be retained as much as is commercially possible because it is a very important asset to the company because whilst it is not core business (ECN is not FXCM’s mainstay – retail FX is) it is very profitable.

Now bearing all of this in mind, let’s take a look at the market capitalization figures.

FXCM, with its vast global business, has a market capitalization of just $50 million, which is £37 million. FXCM reported a net loss in 2015 of $932,797 meaning no dividends and no tax liability for the year.

Recently listed CMC Markets in London only floated 31% of its stock when it became a public entity on the London Stock Exchange’s main market this year, however the company’s market capitalization is £827 million, which although almost 8 times higher than that of FXCM, is a relatively small gulf compared to the others.

IG Group’s market capitalization is £3.1 billion, Hargreaves Lansdown, which only serves British customers and has no institutional business whatsoever is worth £5.91 billion and is the largest financial services company in Britain.

Plus500 is worth £873.9 million and has absolutely no sales force and very few operating costs.

Back on FXCM’s side of the Atlantic, Interactive Brokers has a market capitalization of $15.12 billion and has an adjusted net capital figure of $3 billion. It has $206 million of excess funds in segregated accounts and $2.9 billion of client assets in segregated accounts.

That is a gargantuan company indeed, and yet it has very little reach in some of the key markets in which FXCM has massive customer loyalty.

GAIN Capital has less adjusted net capital than FXCM at $40 million, and has just $130 million in retail FX obligation. Although small compared to Interactive Brokers, its market capitalization is $340.33 million making FXCM a very easy target.

The original terms

“If you were going to lend someone $300 million, how much due diligence would you do on them? Probably months, using auditors and lawyers, and even then, you would be careful. Leucadia had one day to decide, and they had to trust us. I gave my word that I would stay and give them their money back. They had to take my word for it and as a result were safeguarding themselves, which I consider to be absolutely normal business practice” said Mr. Niv.

The emphasis here must be on the terms being applied due to the short time, and not due to any predatory mindset from Leucadia. “We did this deal on the strength of history and on who we are. They did it on a whim that they are backing the market leader” stated Mr. Niv. This is not to be taken lightly as Leucadia is a vast, publicly reporting company that is astute and knows its business very well indeed.

Mr. Niv stated that the company’s market capitalization is smaller because of the reverse share agreement. Apart from that everything is the same. “If you make massive changes, it will make customers leave” said Mr. Niv.

“Looking at the next few years, we will stay within our retail FX roots with a much smaller and different looking institutional business,” explained Mr. Niv during our meeting in December. “FXCM Pro will service retail brokers, small hedge funds, largely algos and HFTs through prime of prime using core technology, as well as our whole sale business” he concluded.

An interesting prospect? I should say.

After what GAIN called a highly accretive transaction – the acquisition of FXCM’s U.S. client assets in February 2017, the broker continues to review strategic M&A opportunities.

Online trading major Gain Capital Holdings Inc (NYSE:GCAP) has just posted its key financial and operating metrics for the final quarter and full year 2017, with the report showing a well pronounced rise in retail client assets but also the negative impact of the recent changes in the US tax laws on GAIN’s income.

The company reported year-end total retail client assets of $749.6 million, up 25% year-over-year. This was noted by Glenn Stevens, CEO of GAIN, who said the areas of growth included retail client assets and GAIN’s ECN platform, which has been taking market share and increasing trading volume. He added that in the first two months of 2018, thanks to a resurgence of market volatility, the broker is seeing positive returns on its efforts to grow client assets and direct accounts.

In line with previous announcements, GAIN stressed that the deal for acquiring the accounts of clients of FXCM’s US retail Forex business in February this year has been highly accretive, with total cost of $7.2 million and CTR of $15.5 million. In its latest presentation to investors, GAIN says that it continues to review strategic M&A opportunities.

With regard to its retail FX business, GAIN keeps building its offering. In line with a strategy unveiled in its presentation for the third quarter of 2017, Forex.com launched Bitcoin trading in the final quarter of last year. Also, Gain Capital’s UK business started offering GetGo – an innovative, trade signals app for novice traders. The global rollout of the solution is planned for 2018.

The financial picture for the year was seriously affected by the U.S. Tax Cuts and Jobs Act. The tax reforms resulted in a $3.1 million (or $0.10 per share) decrease in adjusted net income for the full year. The drop was $5.7 million, or $0.13 per share, for the fourth quarter of 2017. (Update – March 12, 2018 – Earlier today, GAIN posted an update with regard to the tax reforms impact. The update states: “Removing the impact of the U.S. Tax Cuts and Jobs Act on GAAP net loss, net income in the fourth quarter would have been a net profit of $1.2 million or $0.03 per share, while the full year would have been a net loss of $6.3 million or $0.10 per share.”)

The company incurred a $3.7 million net loss in the final quarter of 2017compared to a net profit of $20.8 million for the equivalent period a year earlier. The net loss for the full year to end-December 2017 was $11.2 million, compared to a net profit of $35.3 million in 2016.

Net revenue of $308.6 million for the year and $69.7 million for the fourth quarter 2017, down from $411.8 million and $115.8 million, respectively.

Adjusted EBITDA also fell. It amounted to $35.1 million for the year, down from $99.6 million in 2016. Adjusted EBITDA for the fourth quarter of 2017 was $7.3 million, down from $36.9 million registered in the same period in 2016.

More information is set to be provided in GAIN’s Annual Report for 2017 with the Securities and Exchange Commission.

Lower volatility environment in the quarter ended June 30, 2018, weighed on revenues which staged a 7% drop in annual terms.

Online trading major Gain Capital Holdings Inc (NYSE:GCAP) has earlier today posted its key financial and operating metrics for the second quarter of 2018, with the company seeing a steep rise in income but a drop in revenues as a result of lower volatility environment.

GAIN reported GAAP net income of $67.1 million, or $1.47 per share, for the three months to June 30, 2018. This is substantially higher than the net income of $16.1 million registered in the first quarter of 2018 and the $13.9 million in net income posted in the second quarter of 2017.

GAAP net revenue amounted to $84.2 million in the second quarter of 2018, down 7% year-over-year. Glenn Stevens, CEO of GAIN, commented: “Despite the lower volatility environment during the second quarter, our results for the first half of 2018 remained strong with net revenue from continued operations increasing 29% year-over-year, demonstrating our early success in executing on our strategic priorities to deliver more sustainable returns and drive growth”.

Mr Stevens also highlighted the benefits of the sale of GAIN’s institutional GTX ECN business. On June 29, 2018, GAIN completed the sale of the Company’s GTX ECN business to Deutsche Börse Group via its FX unit, 360T for a total purchase price of $100 million. In connection with the closing, the Company received approximately $85 million, net of taxes and transaction-related expenses and fees and recorded a pre-tax gain on sale of $69.6 million. Net proceeds are set to allow GAIN to invest in organic growth and provide increased financial flexibility to pursue M&A opportunities, return capital to shareholders via our stock repurchase program, and reduce debt.

With regard to the new ESMA/FCA regulations, which are set to come into effect on August 1st, GAIN said it expected the impact from the new rules on its business not to be material.

The company reiterated its commitment to investing in new products and services. A new web trading platform is set to launch in August after a successful UK Beta program. The broker is also upgrading its existing MetaTrader offering to include MT5.

Further enhancements to mobile apps are in store, as these apps now account for 57% of customer volume. Speaking of mobile apps, let’s note that GetGo is about to be withdrawn from the UK/EU market, as a result of the new ESMA/FCA rules. The app is set to be launched in other jurisdictions.

GAIN also mentions a Direct Market Access (DMA) initiative, Prime of Prime agency execution for high volume FX traders. This is scheduled to launch in the US market in the third quarter.

Four years ago, FXCM proposed a transaction that would have given Gain shareholders 0.3996 shares of FXCM Class A common stock for each share of Gain common stock.

The tables turn frequently in the Forex industry. FinanceFeeds has kept its readers up-to-date with the latest developments around FXCM, following settlements with regulators that forced the broker out of the US retail FX market. One of these developments was the sale of FXCM US retail accounts to GAIN Capital.

Four years ago, however, the situation was quite different. It was FXCM that was eyeing GAIN Capital.

A letter from FXCM Inc (now known as Global Brokerage Inc) dated April 8, 2013, contained a proposal for the acquisition of GAIN Capital. Under the proposal, Gain shareholders would have received 0.3996 shares of FXCM Class A common stock for each share of Gain common stock. Based on FXCM’s closing price of $13.39 on April 8, 2013, the offer price was $5.35 per share of Gain common stock. The total was $210.4 million. The offer price represented a 25% premium to Gain’s closing share price on April 8, 2013.

FXCM said back then it was also prepared to offer up to $50 million in cash consideration in lieu of FXCM shares.

The Board of GAIN Capital replied that it will consider the proposal, as well as “a range of options to build shareholder value”. It reiterated there was no assurance that any transaction would be consummated.

This was an important remark to make, as on April 9, 2013, GAIN’s Board of Directors announced the adoption of a stockholder rights plan, aimed at reducing the likelihood that a potential acquirer would obtain control of GAIN by open market accumulation or other tactics without paying an appropriate premium for the company’s shares.

Under the plan, Rights would be distributed as a dividend at the rate of one Right for each share of common stock of the company held by stockholders of record at the close of business on April 22, 2013. Each Right would entitle stockholders to buy, upon occurrence of certain events, one one-hundredth of a share of a new series of participating preferred stock at an exercise price of $17.00.

The Rights would have generally been exercisable only if a person or group had acquired beneficial ownership of 15% or more of the company’s common stock, or had commenced a tender or exchange offer that, upon consummation, would have resulted in a person or group owning 15% or more of the company’s common stock, subject to certain exceptions.

The official “No” answer to FXCM’s proposal was given on April 25, 2013, when GAIN Capital announced the acquisition of GFT to bolster its derivatives and FX business. The reason for the rejection was that the bid was seen as undervaluing GAIN and would not have been in the best interest of the shareholders. FXCM Inc withdrew the offer after that.

Four years later…

FXCM Inc is now Global Brokerage Inc and FXCM is out of the US retail FX market. On February 7, 2017, GAIN entered into a definitive agreement to acquire the US retail client accounts of FXCM. There was no upfront payment made, with the sum to be paid depending on the trading activity of the clients migrated. The transition was formally completed during the weekend following February 24, 2017. According to GAIN, the move saw the transfer of more than 47,000 accounts with total assets of about $142 million from FXCM US.

Revenues and pre-tax profits rose in annual terms although the earnings lagged behind the results seen in Q1 2018.

Electronic trading major Interactive Brokers Group, Inc. (NASDAQ:IBKR) had a solid second quarter of 2018, the metrics reported earlier today show. Although the results were not as impressive as in the first quarter of 2018, the revenues and profits improved when compared to their levels from the equivalent period in 2017.

The broker reported diluted earnings per share on net income of $0.58 for the quarter ended June 30, 2018, compared to $0.32 for the same period in 2017. This compares to $0.63 for the first quarter of 2018. The Group posted diluted earnings per share on comprehensive income of $0.39 for the second quarter of 2018, compared to $0.41 for the same period in 2017.

Net revenues also staged a rise in annual terms – they amounted to $445 million in the three months to the end of June 2018, whereas income before income taxes was $271 million this quarter, compared to net revenues of $387 million and income before income taxes of $204 million for the corresponding period in 2017. Interactive Brokers attributed the robust results for the quarter to strong growth in net interest income, which increased $70 million, or 45%, and higher commissions, which increased $25 million, or 16% from the year-ago quarter.

On the downside, the results for the quarter include a $21 million loss on Interactive Brokers’ currency diversification strategy, compared to a $29 million gain in the same period in 2017. The results also include a $3 million net mark-to-market gain on the brokerage’s U.S. government securities portfolio, compared to a $3 million net mark-to-market loss in the equivalent period in 2017.

Across segments, the electronic brokerage business saw income before income taxes increase 43%, to $283 million in the quarter ended June 30, 2018, compared to the same period last year. Net revenues rose 33% to $443 million on the back of higher net interest income, commissions revenue and other income.

The electronic brokerage segment registered a 47% year-on-year increase in net interest income as average customer credit and margin loan balances and benchmark interest rates staged a rise from the year-ago quarter. Commissions revenue grew 16% from the year-ago quarter thanks to higher customer volumes in futures and options, which increased 21% and 13%, respectively, while stock volumes decreased 5% from the year-ago quarter.

Pretax profit margin in this segment was 64% for the quarter ended June 30, 2018, up from 59% in the same period last year.

Let’s also mention some of the operating metrics of the electronic brokerage segment. Customer accounts grew 27% to 542,000 and customer equity increased 29% from the year-ago quarter to $134.7 billion. Total DARTs for cleared and execution-only customers marked a 19% year-on-year rise to 797,000. Cleared DARTs were 739,000, up 19% from the same period last year.

Regarding the market making segment, the brokerage notes that this business saw income before income taxes increased to $9 million in the quarter ended June 30, 2018, as compared to a pretax loss of $24 million in the year-ago quarter, during which Interactive Brokers continued to wind down operations in this segment.

The results for the second quarter of 2018 reflect lower operating costs on the remaining operations and the non-recurrence of $22 million in one-time exit costs related to the wind-down of Interactive Brokers’ options market making business recognized in the year-ago quarter. In the third quarter of 2017, the broker completed the transfer of its US options market making business to Two Sigma Securities, LLC and by year-end the broker had exited the majority of its market making activities outside the US.

Interactive Brokers’ Board of Directors has declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 14, 2018 to shareholders of record as of August 31, 2018.