Since the start of the year, Cyprus headquartered broker Exness has been racking up some major trading volume numbers. In March the company surpassed $2trn in volumes for the first time, a feat it managed to repeat last month as well.
The numbers in question are remarkable and would mean the company far surpassed the volumes at Saxo Bank, as well as FX trading on major platforms, like Euronext and Cboe, over the same timeframe.
Dig into the numbers a bit more and things get kind of weird though. According to Exness’s financial reports, there were 281,279 active clients on the platform last month. Over the same period the company reported a total trading volume of $2.105trn.
When you put those two figures together, it would mean the average Exness client traded close to $7.5mn last month. That is a lot of money. Even if you were trading on the maximum leverage currently permitted by the FCA or most European regulators, it would mean putting down somewhere in the region of $150,000 as margin.
Given that the average deposit size for retail traders earlier this year was less than $13,000, it seems unlikely that Exness is managing to rake in lots of big dog clients and getting them to trade loads. Indeed, it’s made even more unlikely by the fact that many of their clients seem to be in emerging and frontier markets, like Pakistan or Malaysia, where one would assume client deposits are lower than the global average.
So how does the company manage to generate such high trading volumes? Well, if you look at their website, it appears that traders with under $1,000 have the ability to access infinite leverage. Obviously this didn’t happen / isn’t possible but I think it would be amazing if their entire volumes for April were one guy putting down $100 as margin and trading on leverage of 1:21,050,000,000.
Clients with over $1,000 can still access leverage of 1:2000 on certain asset classes and, if they have over $5,000 in their account, of 1:1000. Basically it seems very likely that Exness’s massive volumes are due to the huge amount of leverage that clients can access, rather than clients putting down large amounts as margin.
What that means is that, although the numbers aren’t phony, it’s very unlikely that they would be able to report those sorts of volumes if they were offering retail services via an entity regulated by the FCA, CySEC, or some other European regulator.
This leads to the question of how meaningful these figures actually are. Obviously it’s good for Exness’s PR team to report such high figures but beyond that, it’s hard to say if the numbers have much substance to them.
The reason for that is fairly simple. Let’s say a broker adhering to FCA leverage limits reports a GBP/USD trade with a notional value of £100,000. To open that trade, the minimum the person can put down as margin is approx. £3,333. With Exness the equivalent figure would be £50. So the notional value of the trade may be the same but the margin is almost 67x lower with Exness.
As a result, the topline, reported figure of £100,000 doesn’t reflect the quality of the client on your books (assuming you equate larger deposits with better clients, which most brokers seem to do). It also doesn’t reflect the amount of revenue you can derive from the trade, although I also don’t doubt Exness is making a lot of money at the moment.
Another funny question is what happens to someone using 1:2000 leverage?
The cool thing is that Exness releases its own trading data and you can see all their price quotes on a given day. So if you were trading GBP/USD on May 20th with the opening bid/ask price listed how long would you last before getting a margin call?
My assumption was about 10 seconds but, assuming you were long USD, you would actually have to wait a massive 7 minutes 11 seconds. Good luck to all the Exness traders out there!
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