DMM FX, Australian arm of Japanese giant DMM Securities, suddenly ceases operations. What are the implications?

Japan is home to 35% of all retail FX order flow, yet it is concentrated within the domestic maket, with a number of Japanese retail trading giants producing, in many cases, volumes of over $1 trillion per month, per company, purely from order flow from Japanese customers.

For the dominant firms in the industry, taking operations outside Japan has been a deal harder, further emphasized today by DMM FX’s sudden decision to exit the market and wind up its Australian operations.

In its home territory of Japan, DMM Securities, the parent company of DMM FX, is one of the largest retail FX firms not only in Japan but in the world in terms of volume, it being one of the record breakers during 2013 when it produced a sustained period of $1 trillion monthly volumes during the summer months.

Today, DMM FX has published on its website the following message:

DMM FX Australia Pty Ltd (DMM FX) wishes to advise that we have made a business decision to cease our current operations in Australia.

Clients are requested to close all open positions by 03:00 am Saturday, 30 July 2016 Australian Eastern Standard Time. Any remaining open positions as at that time will be closed by us in accordance with the available prices between 03:00 a.m. and the market close on 30 July 2016.

We will cease to process client deposits from Monday 1 August 2016.

Clients are advised to withdraw all funds in their trading account by Friday, 19 August 2016. Any pending withdrawals by this time will be done by us on our clients’ behalf where possible.

Once this is done, all client accounts will be closed and termination of the agreement on the DMM FX Account Terms will be effective. We would like to take the opportunity to thank you for trading with us. We sincerely apologise for any inconvenience caused. Please feel free to contact us if you have any questions.

The very Japan-centric nature of the larger Japanese firms has thus far presented difficulties in exporting the expertise that they have in the domestic market overseas.

Indeed, only one company has successfully done this, that being Invast Securities, however Invast’s approach was somewhat different in that it established itself as a separate, Australian entity which provides prime brokerage services and retail trading to a completely Western audience, operated by Western senior executives with several years of experience in Western bank and non-bank institutions rather than placing a blueprint of the Japanese operations in Australia. On this basis, Invast has gone from strength to strength in Australia.

Whilst the closure of DMM’s Australian operations appears not to be driven by any regulatory matter, and is indeed a strategic internal decision, the suddenness of the decision is a point of interest.

In cases like this, it is not just client funds that are a consideration, as this is covered in the company’s message. Large firms often enter long term supplier agreements with technology vendors and service providers, therefore considerations of this nature are often overlooked however FinanceFeeds is aware that, despite this being an orderly wind-down, attention should be paid to suppliers as well as customers.