Gain Capital Is Set to Become the Biggest U.S. Retail FX Provider

  • About 40,000 FXCM client accounts to move to Gain this weekend
  • FXCM withdraws from U.S. after $7 million fraud penalty

Gain Capital Holdings Inc. said it’s poised to become the U.S.’s biggest retail foreign-exchange provider this weekend.

The company will add about 40,000 customer accounts from rival Forex Capital Markets LLC, which is exiting the U.S. market after it was fined $7 million for fraud and co-founders Dror “Drew” Niv and William Ahdout resigned. The accounts will close Friday and reopen Sunday, with Gain paying FXCM a blended rate of about $375 per account, according to Gain, which currently has about 23,000 U.S. accounts.

“We are confident in our ability to treat customers fairly and operate with integrity,” Glenn Stevens, Gain’s Bedminster, New Jersey-based chief executive officer, said by phone. “It does take some convincing, so we’re prepared to work hard to prove it to former FXCM clients that are coming over to our company.”

The departure of FXCM, formerly the largest U.S. retail currency firm, may prompt more regulatory scrutiny of the industry, analysts say. It also poses a challenge to the remaining companies, including Gain and Oanda Corp., which are seeking to secure their reputations after FXCM’s travails.

“The actions of unscrupulous brokers taint the entire industry,” said Vatsa Narasimha, Oanda’s chief executive officer, who’s based in New York. “For the good of the entire industry, we encourage this type of scrutiny and regulatory action. Full transparency is of utmost importance to ensure market integrity and confidence.”

Gain shares fell about 1.2 percent Friday to $8.04. They’re still near a 14-month high.

‘Seamless Transfer’

The Commodity Futures Trading Commission fined FXCM after concluding it misled retail traders who bought and sold currencies on the unit’s “No Dealing Desk” from September 2009 through 2014, according to a Feb. 6 order.

“FXCM has worked closely with Gain to ensure a seamless transfer of the accounts,” Jaclyn Sales, a spokeswoman for FXCM, said in an e-mail. “Even without its U.S. customers, FXCM remains one of the largest global retail foreign exchange brokers, and FXCM anticipates that the increased focus on serving its international global customer base will drive growth.”

FXCM is still active in the U.K., Europe and Australia.

“There is no denying that some of the CFTC points regarding retail FX were valid,” Javier Paz, a senior analyst at consultant Aite Group, wrote in a blog post.

“A lot of people can sustain major losses trading FX,” he wrote. “Some brokers do use technology to their advantage and are shady. But conversely, there are consistently profitable retail traders and there are reputable brokers.”

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