What can we infer about FXCM US accounts transfer from GAIN’s FY 2016 report?

Maria Nikolova

The incremental revenue GAIN expects from FXCM’s transaction for FY2017 is actually based on what Glenn Stevens called a “hybrid model”.

FinanceFeeds continues to explore the details of the transaction that saw the US retail client accounts of FXCM transferred to Forex.com, the retail FX subsidiary of Gain Capital Holdings Inc (NYSE:GCAP). Yesterday, GAIN posted its results for the final quarter and full year of 2016, with the press release containing a rather bullish statement by GAIN’s CEO Glenn Stevens, saying that the company is pleased with the activity of newly acquired FXCM customers in the first week following the completion of the transfer.

In the subsequent conference call, however, Glenn Stevens and GAIN’s CFO Nigel Rose were much more subtle when it came to the actual activity of transferred FXCM customers.

According to the announcement, Forex.com’s active client accounts in February 2017 amounted to 133,027, an increase of 4.6% (or about 6,000 accounts) from January 2017. This sparked questions during the conference call (rough transcript can be viewed at SeekingAlpha) about what part of this rise can be credited to newly acquired FXCM accounts.

According to both Glenn Stevens and Nigel Rose, the majority of the growth is non-FXCM, because only two of the trading days in February 2017 had any customers of FXCM US. Mr Rose also noted that FXCM customers are not used to the platform having just migrated across. These two days are not as active as any two days in the future, when the new customers get used to Forex.com’s services.

Regarding the number of accounts acquired vs accounts active, Mr Stevens stressed that indeed 47,000 accounts were transferred from FXCM but according to the latest data from FXCM itself, it had 26,000 active accounts in the final quarter of 2016. How many of these remained active in 2017 and how many would be active with Forex.com is uncertain.

A final aspect to consider is that, with relation to FXCM accounts acquisition, GAIN said it expected $15 million to $20 million of incremental revenue for fiscal year 2017 with minimal cost associated with that revenue.

During the conference call, Glenn Stevens explained that this estimate is based on some sort of a hybrid model, that is, it does not only include GAIN’s metrics from its internal operations but also metrics FXCM is providing in its disclosures. So, there is a lot more information needed to produce a precise estimate.

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