International brokers leave US market

NEW YORK - A growing number of international retail FX brokers are leaving the US market, with London-based ODL Securities becoming the latest to ditch its US operations to avoid meeting capital requirements to operate there.

Last Thursday (Jan 15), the company announced the sale of its US operations to New York-based FXCM, ahead of planned increases in capital requirements to operate a retail trading business in the US. The National Futures Association (NFA), the industry regulator, introduced a series of rules last year to tighten regulation of the retail FX market, including upping capital requirements from $5 million (FX Week, March 17, 2008).

ODL says the capital requirements "have made it increasingly burdensome for all forex dealer members to operate in the United States. These include increases in the minimum amount of regulatory capital that a forex dealer member must maintain - up by three times over the past year and due to increase further in May to $30 million." The next level of increase was effective January 17, which sees the requirement reach $15 million.

The two companies had been in discussions since December for the deal, which sees FXCM acquire ODL's MetaTrader4's trading accounts, which offer ʽno dealing desk execution' and fractional pip pricing, in line with FXCM's business model. Both parties declined to reveal the value of the deal but FXCM added that it will announce a further acquisition soon.

FXCM, which trades monthly notional volumes of $350 billion platforms, is also looking at acquiring some Swiss-based companies as regulatory reforms pressure traders to acquire banking licences (FX Week, October 1, 2007). The firm is understood to have at least three other acquisition deals lined up.

Meanwhile, ODL is instead using its capital to grow in other regions, with a joint venture in Turkey and Australia, and further expansion in Japan and Canada. The company recently strengthened its sales and services desks in London with five new hires targeting Middle East and Far East sales.