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FXCM’s Shares Gain After Online Currency Trading IPO

FXCM Inc. climbed 6.1 percent in its first day of trading after the provider of currency trading on the Internet for individual investors raised $211 million in its initial public offering.

The operator of the DailyFX.com website gained 85 cents to $14.85 in New York Stock Exchange trading after earlier advancing as high as $15.34. New York-based FXCM sold 15.1 million shares at $14 each yesterday after offering them at $13 to $15, according to a filing with the Securities and Exchange Commission and a statement.

The initial sale was the first by an online trading platform since Interactive Brokers Group Inc. in May 2007 and followed the busiest month for U.S. IPOs in three years, data compiled by Bloomberg show. Foreign-exchange trading by individual investors has surged 12-fold since 2001, according to Boston-based Aite Group LLC.

FXCM is “somewhat unique in terms of its offering,” said Walter Todd, co-chief investment officer at Greenwood, South Carolina-based Greenwood Capital, which oversees about $900 million. “Retail investors are looking, rightly or wrongly, for alternatives to what they’ve done in the past. Foreign exchange would be one of those areas.”

Credit Suisse Group AG of Zurich and New York-based JPMorgan Chase & Co. and Citigroup Inc. led the IPO, the prospectus said. FXCM will use proceeds to fund acquisitions.

November IPOs

The initial sale was the only IPO scheduled for this week after 23 companies completed offerings last month, the most since November 2007, data compiled by Bloomberg show. Detroit- based General Motors Co. sold $18.1 billion of common shares in the second-largest U.S. IPO on record.

FXCM’s profits climbed 16 percent to $79.4 million in the first nine months of 2010 after rising 12 percent in the previous four years, according to its SEC filing.

Revenue increased 6.5 percent to $264 million in the first three quarters of this year. Trading from individual investors accounted for 94 percent of sales in 2009, the prospectus said.

The IPO valued FXCM at 16 times 2010 earnings, a 43 percent discount to the median of five companies cited in the IPO prospectus as competitors, data compiled by Marina del Rey, California-based IPOdesktop.com and Bloomberg show.

‘Positive Sign’

“They brought the deal at a fairly attractive price,” said Timothy Cunningham, a money manager at Santa Fe, New Mexico-based Thornburg Investment Management, which oversees about $70 billion. “It’s a moderately positive sign that they got this done at the middle of the range.”

Interactive Brokers, the Greenwich, Connecticut-based options market maker, trades at 28 times estimated 2010 earnings, according to data compiled by Bloomberg. OptionsXpress Holdings Inc., the online derivatives brokerage in Chicago that completed an IPO in 2005, is valued at 21.2 times profit.

TD Ameritrade Holding Corp., the Omaha, Nebraska-based retail brokerage, trades at 17.8 times earnings for the year ended in September. E*Trade Financial Corp. of New York is valued at 447 times estimated 2010 profit and 26.6 times 2011 earnings, analysts’ estimates compiled by Bloomberg show.

Gain Capital Holdings Inc., the Bedminster, New Jersey- based operator of FOREX.com, registered with the SEC in August 2009 to sell stock in an IPO. The company said in an amended filing today that it plans to offer 11 million shares for $13 to $15 each.

Foreign Exchange Trading

Gain Capital is seeking to go public after foreign exchange trading totaled an average of $4 trillion a day in April 2010, about 20 percent higher than three years earlier, according to data compiled by the Basel, Switzerland-based Bank of International Settlements.

Average daily currency trading by individual investors totaled about $125 billion in 2009, an increase from $10 billion in 2001, according to Sang Lee, managing partner at Aite Group, an advisory firm for the financial-services industry.

To contact the reporters on this story: Cecile Vannucci in New York at cvannucci1@bloomberg.net; Lee Spears in New York at lspears3@bloomberg.net.

To contact the editor responsible for this story: Daniel Hauck at dhauck1@bloomberg.net.

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