Increased Volatility Generates $4.9 Million in Profits for FXCM UK
July 29, 2021
Forex Capital Markets Limited (FXCM), the FCA-regulated brokerage owned by Jefferies Financial, released its annual financials for the fiscal year ended December 31, 2020, reporting a net profit of over $4.9 million. This is important because the firm lost more than $1.2 million in 2019, indicating a 518.8% increase.
Additionally, according to the Companies House report, the company's turnover for the time was $15.46 million, down 7.5 percent compared to the previous year.
FXCM provides both retail and professional clients with foreign exchange (forex) and contracts for differences (CFDs) trading services. It is rapidly extending its services, and recently introduced social and copy trading services.
A More Profitable Revenue Model
The significant gains followed the broker's decision to simplify its revenue model at the start of 2020. According to the filing, the business hedges its clients' trades with affiliates in exchange for a simple fee based on a proportional contribution to overall FXCM group earnings. White-label solutions, back-office and trade execution services, FX market prices, and other auxiliary services all contribute to company earnings.
Furthermore, FXCM benefited from market volatility in 2020, which drove up trading volumes significantly. It gained 11% year-over-year, averaging at $50 billion in volume per month.
Additionally, the gains were generated by a 36 percent reduction in the broker's administrative costs. Its brokerage division had a nearly $4.4 million operating profit.
By the end of the year, however, the broker's client cash had plummeted by 24.9 percent to $174.5 million. The drop, according to FXCM, was mostly triggered by withdrawals of several high-value clients.
In 2021, FXCM is concentrating on keeping and increasing its client base. The broker stated, "The company's objectives for 2021 are to optimize revenues from existing and new businesses while enhancing the X Open Hub brand."
“The Company is also re-evaluating how client trade flows are managed, focusing less on a small set of indicators and more on technology that gives a holistic insight into client trading patterns,” says the statement.