The foreign-exchange industry will see many brokerages close or be bought out as they struggle to cope with a decline in business, according to Brendan Callan, chief executive officer for Europe at FXCM Inc.
“Small firms won’t survive” as low volatility levels cut volume and revenue, Callan said at a briefing in London today. FXCM, an online currency broker, expects to be “very aggressive” in acquisitions, he said.
JPMorgan Chase & Co.’s G7 Volatility Index, derived from premiums on foreign-exchange options, dropped to the least since 2007 last year as record-low central-bank interest rates and exchange-rate controls damped rewards of currency trading.
The index was as low as 7.06 percent on Dec. 18, down from as much as 26.55 percent in October 2008. It rose to 8.43 percent today.
FXCM saw trading volume by retail customers fall 9 percent in the fourth quarter from a year earlier to $886 billion, according to company data. FXCM sees foreign exchange market volatility increasing through this year, Callan said.