Foreign exchange and contracts-for-difference (CFD) broker FXCM reported massive losses in 2018 as low volatility refused to leave the market. The company’s turnover also decreased in 2018 as compared to the previous year.
Grim 2018 financial results
Forex Capital Markets Limited (FXCM) recently published the financial results for 2018 for its UK businesses. The company suffered a loss of over £5 Million in the 12 months ending December 31, 2018. In the previous year, the company suffered a loss of £521,484. This year, their loss increased by an unprecedented 867.3%. Their turnover witnessed a 24.6% drop from £78 million in 2017 to £58.8 million in 2018.
FXCM’s results for 2018 fall in line with the reports from other brokers in the European Union who are stuck with low volatility rates. The profit and revenues of the brokers have decreased on account of the new European Securities and Markets Authority (ESMA) rules, which introduced a slew of product intervention measures. These new guidelines restrict leverage on products extensively. FXCM noted that the drop in its profits was driven largely by the decrease in trading volumes. Some damage was done by ESMA measures as well.
Trading volume continues to drop
The retail trade volume of the company remained sown significantly throughout the year. It registered a 34 percent decrease from the $1.672 trillion figure in 2017 to the $1.104 trillion figure in 2018. In its report, FXCM clarified that the company’s profitability and revenue depend on higher volatility in the market. It states that volatility in this market depends excessively on the expectation of interest rates in the future.
The 2019 numbers for the company are also not expected to be great. The report suggests that the second half of 2019 will also continue on the low volatility trend. Events like worsening US-China trade talks, European elections, and impending Brexit will temporarily lead to a rise in volatility. However, as G7 interest rates remain stagnant, hopes for lasting volatility in the markets will remain damp.
FXCM is trying to fight off this low volatility by retaining and growing its client base throughout the year. The main objectives of the UK-centric business are to optimize revenues and strengthen the brand. It is trying to improve the conversion rates of new account applications. Conscious efforts are being made to decrease the time taken to apply for a new account and place a trade.