Sunday, January 21, 2007

Consolidations in the FX Markets

There was an article in this weeks FX-Week about Brokerage consolidation. This has been an on again off again story over the past few years, it is also something which has to happen. A recent poll on the Lords of the Forex Yahoo groups asked

Which one(s) is/are your forex brokerage firm? (you can choose more
than one if you work with more than one firm)
o MGForex
o SaxoBank
o GFX Group
o MIG Investsments
o CMS Forex
o Synthesis Bank
o CMS Forex
o FXSol
o Interbank FX
o IFX Markets
o CMC Markets
o Man financial
o Crown Forex
o Other

This is certainly a lot for any trader to digest. This situation reminds me of the earlier 1990’s when there used to be (and I use this bank as an example only) a Sumitomo bank branch in
New York, San Francisco, LA, Chicago and Toronto. All of these branches, trading the same instruments and products with little to no communication (now again I use this bank as an example only I have no knowledge of how this organization operated or currently operates) between themselves. As technology became more efficient it was easier and cheaper to consolidate what each branch was doing. Currently most international financial institutions would have one major “hub” per time zone and a few “spokes” which feeds off them. This is exactly what will happen with the FX portals. A few of these portals will get together combine technology, customers and goals to form a more sizable company able to compete in the market place. The article in FX-Week talks about two large French banks merging their brokerage units, Fimat and Calyon Financial. The chief executive of Fimat Nicolas Breteau, is quoted as saying “The industry trend is towards consolidation, and you need to be as big as possible to compete in this environment”. He goes on to talk about the growing volumes (increased execution risk) and lower commissions. A consolidation of portals is a reasonable conclusion. This will also help when it comes to defaults (Refco !?!?). A lot of people were left high and dry after Refco collapsed. I think with consolidation less of that would happen.

These are my FX Trading Ideas for today, what are yours?



Blogger Forex Blogger said...

I've been doing some research with various brokers the last few weeks and have come to the conclusion that there aren't any great brokers all have a problem somewhere or another.

5:40 AM  

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