Difficult Year for Forex Brokers.
After years of expansion, 2012 brought changes to brokerage industry. This time they were not government mandated, but rather caused by the market itself. Several large Forex brokers have reported substantial volume declines, is some cases as high as 40% from last year. Just few days ago, one of the largest brokers in the USA, GFT Forex, decided to close doors for retail traders, focusing on institutional clients only. Some blame it on the increased margin rules in America, but the weakness is wide spread, affecting brokers on other continents as well.
There are several reasons behind it. One is the overall decline in volume, although from a larger perspective that should not be troubling, because currency markets had been expanding fast for many years before. A slow down and even a small decline is natural. The number one cause is likely the difficult trading environment we have been in for some time now. Currency hedge funds have had a rough year and the same must be true for individual traders. People are most likely showing poor results and either quit trading or move to much smaller sizes. That hurts brokers who need heavy volume in order to profitable. Hopefully, next year the markets will become more “friendly” and the industry goes through a revival. Especially in the USA, we need few more brokers in order to improve competition among them.
Chart are not very inviting at the moment, with several more central bank announcements still in the pipeline this week. However, the GBP-JPY appears to falling slowly and showing a strong support at 131.55 or so. If this level breaks, I would like to short the beast at 131.49. My objective here is 50-60 pips, which could happen fast once currencies start to move again, possibly before the end of this week.