Bring AI trading to your brokerage with cTrader
Last week was iFX, which means stumbling around through buttery humidity, with the punishing sun shining down on your increasingly worn out and hungover frame. Make it stop, make it stop, you think. But stop it won’t.
It’s also a great occasion for me because I get to hear all the gossip about what’s going on in the industry. In the past, people would tell me things. Today they tell me things and also tack on the phrase ‘and if you publish that I will kill you’ to the end of their sentence. I enjoy living so all I’ll say is interesting things are afoot.
One notable trend is M&A and, as it’s hardly secret information, a story that people kept bringing up was that FXCM is being acquired. I am skeptical of this given that three people told me three different companies were acquiring them, suggesting no one knows quite what is going on.
Get real prime-of-prime liquidity from ATFX Connect
It’s also not really news that FXCM is for sale, given that the current owner, Jefferies, has listed them as a “legacy” business for several years, which is the corporate equivalent of giving a big wink, nudge, and other suggestive gesturing that a business is no longer wanted. They also said explicitly in their 2022 annual report that they intended to sell the company in the near future.
But let’s say FXCM is being sold and someone is going to buy it. Who would want it?
Jefferies does not give a detailed breakdown of the company’s operations. By looking back at some of the investment bank’s annual reports, we find that results for the years ending November 30th, were as follows:
| Year | Result |
|---|---|
| 2023 | ($36.4m) |
| 2022 | $39.0m |
| 2021 | ($21.5m) |
Trade on raw pricing with IC Markets
It should go without saying that figures in brackets are losses.
Jefferies took over FXCM in 2023. Previously they owned half the business, with rights to the large majority of the broker’s dividends. They were also a creditor to Global Brokerage Inc, which owned the remainder of the company.
That loan was secured by Global Brokerage’s own stake in FXCM. In 2023, Global Brokerage was pushed into bankruptcy and so Jefferies took over the remaining half of FXCM, writing off its loan to the business along the way.
Launch Prediction Markets today with Match-Trader
These technicalities are important as they would suggest that FXCM’s main business was not doing that well. We can see this in the results above, with the firm losing almost $40m in 2023. Jefferies also wrote down the value of its holdings in the business in the same year and noted it did not see potential for an increase in that valuation in the next few years.
The only other easily accessible results for FXCM are in its UK entity, which has been loss-making or has generated a small profit since at least 2018. Since that year, 2020 – the covid boom – was the only year the firm’s UK entity generated meaningful net income. However, I would add an important caveat here, which is that the firm seems to shift almost all flow out of this entity, so it’s not a very meaningful indicator of performance.
All of this is to say that FXCM appears to still generate decent revenue but, for reasons that aren’t obvious to me, it does not appear to generate solid profits. My guess is Tradu, which was launched shortly after Jefferies took full control of FXCM in 2023, was probably an attempt to turn things around and it didn’t work. If more of a push has genuinely been made to sell the business today, perhaps it’s because of that.
Hedge your crypto risk with Scope Prime
This is all important because it means a buyer would have to engage in some sort of turnaround to make things work, which would lead to a lower valuation and also make it a less attractive investment proposition.
The other important facets are what the company owns. FXCM has licences in:
- UK
- Australia
- Cyprus
- Israel
- South Africa
- SVG
The firm also has a relationship with a regulated IB in Canada.
These are not really that useful as most CFD providers today either have these licenses or don’t want them. Thus the regulatory footprint that FXCM has is not a strong asset that I can see attracting lots of buyers.
On the technological front, FXCM has its own Trading Station platform and MT4. Maybe people can correct me but I don’t see either of these being big appeals for a potential buyer.
All the best brokers use Pelican for copy trading – why don’t you?
So what is attractive?
The FXCM brand is pretty strong and it’s plausible the company’s institutional arm, along with the relationships and infrastructure that entails, is something people still like.
But the biggest factor is likely to be customers.
Manage your broker’s risk with Centroid Solutions
Last year, FXCM’s UK entity still did 243 yards from retail. Client cash held with the firm was $88.8m.
In the phallus measuring contest of broker volumes, perhaps this is not a lot. But it’s definitely not nothing and it’s also only looking at the FCA-regulated entity.
The bottom line being that FXCM still looks like it has a good client book and that is what any potential buyer will be looking at.
