Update on December 2018:
Many things changed since we originally wrote this article back in 2015, and the ranking of the largest forex brokers is not the same anymore.
The most important change that affected trading volumes was the harsher regulatory environment in Europe that forced brokers operating in the EU to greatly reduce the maximum leverage offered to their clients.
This resulted in European brokers operating under multiple licenses. This is why they operate under an EU valid license (mostly CySEC) when it comes to their European customers, but will use a more permissive offshore license (such as Belize, St Vincent & The Grenadines, etc.) for their international operations. This allows European brokers to still be competitive outside Europe by offering less restricted trading conditions, while operating legally in the EU under the strict guidelines of tough EU regulation.
However, the result of the tough EU regulation was the emergence of Australian brokers as the global leaders in terms of growth.
Australian regulation is seen as strong and reliable while not being excessively restrictive. Right now, some of the largest and most successful brokers in the world are Australian.
IC Markets is the largest forex broker in the world by trading volume according to our research.
It reached a stunning $18.9 billion in average daily volume during the month of October 2018 ($568 billion for the whole month of October).
IC Markets monthly volume in 2018.
FX Volumes in 2018: Europe’s Pain is Australia’s Gain
Source: IC Markets
The reason why IC Markets has been so successful is the fact that it offers true ECN accounts to its clients, which attracted a very high number of high volume traders. Being the broker of choice of professional traders and those using Expert Advisers and autotrading algorithms has seen their volumes surge much faster than those of the competition.
See the original article from 2015 below:
A lot has changed in the retail forex market in the last two years.
Without a doubt, the Swiss National Bank (SNB) decision in January 2015 to stop supporting the Swiss Franc (CHF) was the biggest event of 2015. It shook the market and left Alpari UK filing for bankruptcy and FXCM scrambling for a bailout to survive.
It took two more years for FXCM to finally lose its US license and withdraw from the US market by selling its client base to Gain Capital in February 2017.
While the SNB event had major consequences for retail forex brokers, there were other long term trends that also contributed to the big changes in volumes at major brokers.
The SNB shock and how it affected the major forex brokers
The huge volatility and the 20% overnight movement in the EUR/CHF pair that followed SNB’s decision to remove the Euro peg of the Swiss Franc had different consequences for brokers.
Some of them weathered the storm without a scratch while others lost millions of dollars.
Alpari UK was wiped by the franc movement and on January 19 (2015) applied for formal insolvency.
Another big name that was affected is FXCM. It was reported that the US broker had a massive $225 million in client negative balance and it was rescued by a bailout loan from Leucadia worth $300 million in order to continue operating. The shares in FXCM plunged after the event and have not recovered since (see chart below).
The bailout from Leucadia was insufficient for FXCM to avoid its downfall as the company suffered irreparable damage to its reputation.
Two years later, in February 2017, FXCM announced the sale of its US client base to Gain Capital and the withdrawal from the US market.
Saxo Bank is also believed to have suffered up to 107 million in losses from the SNB move, but in the end it managed to survive the event without much damage thanks to its very strong stocks trading and CFD business.
There are also clear winners from the SNB shock.
Brokers like IC Markets, Direct FX, Oanda, XM, Hot Forex or Forex.com were left without a scratch and were fast to seize on the opportunity to attract more clients from the distressed brokers. XM was quick to point on its homepage that “Negative Balance Protection” is one of its most important values and traders are guaranteed to never go below zero, while Direct FX was the first broker to pay the client’s debt caused by the event.
Overall, what represented the demise of Alpari UK and FXCM was a huge opportunity for other brokers, who were proven to have better hedging and protection systems in place.
As veteran forex trader James Robertson points out, “The SNB shock has meant game over for Alpari UK and a huge drawback for majors FXCM and Saxo Bank.
Two years of volume growth have been wiped in the aftermath of the so called ‘Francogeddon’ for FXCM and Saxo, and they can consider themselves lucky to still be operating.
On the other side, XM, IC Markets, Gain Capital and Hot Forex have emerged as the new growth stories of the forex market.”
Winners: IC Markets, Direct FX, Oanda, XM.com, Hot Forex, Forex.com
Losers: Alpari UK, FXCM, Saxo Bank
Other industry trends that shaped the retail forex market in 2015 and 2016
The forex retail market is very dynamic as hundreds of brokers compete for clients around the world.
Online trading has extended to mobile trading, as many traders now prefer to trade directly from their smartphones or tablets, as they stay connected 24/7. Huge competition results in technological innovation and better service for the clients.
Australian forex brokers by volume
As compared to several years ago, all major brokers feature several advanced trading platforms as well as mobile apps. Spreads went down and execution speed went up.
All for the benefit of the clients. In the last two years we have identified several factors that determined the success and volumes of retail forex brokers.
The strengths and weaknesses of regulation
“Too little regulation is dangerous because it affects credibility and safety, while too much regulation can hinder business growth.” says James Robertsson, and he seems to be spot on if you look at how the forex industry developed.
Tough regulation with high entry requirements and low maximum leverage has reduced competition in the United States and Japan, formerly known as the most important markets.
With little competition from new entrants on their home markets, American and Japanese brokers had little incentive to innovate and adapt to global trends, and this can be seen in their very low market share in foreign markets. American and Japanese brokers were unable to grow their business at a good rate in Europe, Asia, South America and Africa. On the other side, the low leverage enforced by the regulators has limited the upside on their home markets.
This is why we can see American and Japanese brokers no longer dominating the global forex market as they used to do a few years ago. However, the consolidation that happened in the US market because of the strict regulations resulted in Gain Capital (Forex.com) and Oanda becoming some of the world’s largest brokers in terms of volume, despite their lack of success outside the United States. A segregated market with no competition from the outside world is very bad for the retail client, but it is very profitable for the big corporations that manage to be the last ones standing.
They benefit from the lack of competition as they can have a large client base without innovating and improving their services.
It seems that the right balance was found by Cysec (The Cyprus Securities and Exchange Commission), which now regulates the fastest growing European brokers and it is the hot spot for regulation in the European Union.
Brokers under Cysec regulation are doing very well worldwide and seem to be able to grow their business at a very fast rate.
Another regulator that has enjoyed a very good reputation especially in Africa and Asia, as well as a lower cost of conducting business, is ASIC (The Australian Securities and Investments Commission). This resulted in Australian brokers gaining good market share in the global forex market.
Winners: Saxo Bank, XM.com, IC Markets, Direct FX, Pepperstone
Losers: FXCM, Forex.com, Oanda, Interactive Brokers, GMO Click Securities
Main features: Leverage, Spreads and Execution
Leverage plays an important role in increasing the volumes of traders with less capital and it is in high demand in emerging markets like Africa and Asia.
High leverage helps brokers attract more customers and allows them to lower the minimum deposit requirements.
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That’s why the fastest growing brokers in emerging markets are the ones offering higher leverage. Since US brokers are not allowed to offer leverage higher than 50:1 they are unable to compete well in emerging markets.
It’s been widely speculated that high leverage increases risks and tougher regulation forcing a broker to limit leverage will result in the reduction of risk.
However, the SNB shock has proven that there is no link between maximum leverage and the broker being insulated from volatile markets. FXCM has lost millions of dollars although it was limited to a maximum of 50:1 leverage, while brokers like XM were not affected at all, despite having leverage up to 888:1. Brokers will often reduce the maximum leverage allowed before events that greatly increase market volatility, as it was observed during the Greek debt crisis when most brokers reduced leverage during high volatility weekends.
This means that forex brokers with good risk-management teams can navigate market volatility on their own without the need of tougher regulation.
Winners: XM.com, Hot Forex, IC Markets, Direct FX
Losers: FXCM, Forex.com, Oanda, Interactive Brokers, GMO Click Securities
Spreads are also an important factor for many traders when choosing their broker.
High profile brokers like FXCM, Saxo Bank or Forex.com tend to have higher spreads since they target traders with less experience and knowledge about the offering of other brokers. On the other hand, brokers like Hot Forex, XM, Direct FX or Oanda are known for their lower spreads and are very popular on forex forums and websites.
Traders who do their due diligence well are more likely to choose a broker with lower spreads.
Forex brokers with lower spreads will have lower profit margins but have an advantage in client acquisition and tend to grow their client base and daily volumes faster. They also have a better client retention rate and higher profitability among their traders.
Winners: IC Markets, Hot Forex, XM.com, Oanda, Direct FX
Losers: FXCM, Forex.com, Saxo Bank, IG Markets, Interactive Brokers
Execution is very important for scalpers and high frequency traders.
Traders who use Expert Advisers to test their auto trading systems are also interested in the execution speed and quality. Slippage and re-quotes can be very harmful for scalpers and this is why they tend to look for scalper-friendly brokers.
How to measure the biggest forex companies
While they don’t represent a high percentage of the total number of retail clients, high frequency traders (also known as day traders) account for a large share of total volumes as they place a lot of trades daily.
Such traders want to stay away from Market Makers and prefer ECN and STP brokers who are scalper-friendly and have better execution and lower spreads. The most popular brokers among high frequency traders are IC Markets, Hot Forex, XM and Direct FX.
Winners: Hot Forex, XM.com, IC Markets, Direct FX
Losers: FXCM, Forex.com, Saxo Bank, Oanda, IG Markets, Swissquote
Promotions, Accessibility and Special Features
Promotions can be a very good incentive for new traders to choose a certain broker.
High profile brokers like Forex.com, Oanda or Saxo Bank do not offer special promotions for new traders as their market positions allowed them to boost margins instead of fighting for market share. This strategy offered them higher profits in the last two years but hampered their growth and resulted in a loss of market share.
On the other side are the two growth stories of the last two years, namely XM and Hot Forex.
Offering a $30 free bankroll with no deposit required was a great success for XM.com, especially in the emerging markets of Africa and Asia.
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While such promotion might be seen as a way of attracting only low capital clients, it proved to have many positive side effects that helped fuel the amazing growth experienced by XM. A free bankroll creates a lot of buzz in the forex online community and a lot of positive feedback from those who receive it.
Many traders start small but in time they improve their skills and grow their capital and you can end up with high value traders who started with a free $30 bankroll. Another positive side effect of such promotion is that veteran traders who want to change their current broker are able to try the platform on live trading for free and once they are convinced by the quality of XM’s services they bring in their capital and start trading big.
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XM also offers deposit bonuses that can add-up to the trading capital and are an additional incentive to choose them instead of other broker. Considering the fact that XM experienced the highest growth rate in both new customers and trading volumes in the last two years, we can conclude that their promotion was well received and may be one of the many reasons for their great success.
Hot Forex is another growth story and it also features some interesting promotions.
They offered three types of bonuses, called the ‘Supercharged Bonus’, the ‘Rescue Bonus’ and the ‘Credit Bonus’. All of them have different advantages for different types of traders, and in the end they can be a decisive factor when one chooses his forex broker. Judging by the amazing growth rate of Hot Forex we can assume that their bonus policy was at least helpful.
Winners: XM.com, Hot Forex
Losers: FXCM, Forex.com, Saxo Bank, Oanda, IG Markets
Accessibility is another feature that proved to be very important for the brokers’ growth in the last two years.
When moving global and trying to service tens of new markets with different characteristics, it is essential to be accessible to as many customers as possible. Local offices, translated versions of the broker’s website in the local language as well as customer support, accessible funding methods and easy withdrawal of funds are very important to secure growth in international markets.
When it comes to localized service, multi-language support and website, the clear leaders are Saxo Bank, XM and Hot Forex.
This greatly explains why they are very successful in Europe, The Middle East, Africa and Asia. On the other hand, Japanese and US brokers are well behind when it comes to localized services and multi-language support.
Deposit and withdrawal methods are another important factor that helped fuel the growth of the most dynamic brokers, XM, IC Markets and Hot Forex.
The three of them allow deposits and withdrawals through credit and debit cards as well as all the popular e-wallets, including Neteller, Skrill (formerly known as Moneybookers) or Webmoney.
They also allow deposits through prepaid cards like the popular Paysafecard or local debit cards like the Chinese Union Pay. XM and Hot Forex are the only two brokers offering a forex debit card that allows traders to withdraw their money directly at an ATM or to make purchases with a debit card linked directly to the trading account. The Forex Mastercard is very popular in Africa and Asia as it represents a very convenient and cheap method of withdrawing winnings from a foreign broker without local offices.
Hot Forex Debit Card
Coupled with the low minimum deposit requirements of the brokers, the high number of deposit and withdrawal options is one of the main reasons why the three brokers are the only majors who increased their market share in the last two years.
Winners: XM.com, IC Markets, Hot Forex
Losers: FXCM, Forex.com, Oanda, Interactive Brokers
Special Features can also have an important role in volume growth and customer acquisition, as they can attract new customers as well as stimulate higher frequency trading.
When it comes to special features, the clear winner is Hot Forex which is the leading forex broker in PAMM (Percentage Allocation Management Module) trading. Their PAMM accounts allow traders to be account managers or investors who automatically copy the trades of their managers.
Other special features that became very popular in the last two years are Social Trading and Forex VPS (Virtual Private Servers).
Hot Forex offers both of them, but when it comes to VPS the leading broker is XM which offers a high speed free forex VPS for its bigger clients.
Winners: Hot Forex
Losers: FXCM, Forex.com, Saxo Bank, Oanda, Interactive Brokers, IG Markets
Largest forex brokers by volume – The March 2017 rankings
After all the talk about the evolution of the forex market in the last two years, it is time to show the rankings of the largest forex brokers by volume as of March 2017.
The average volumes are measured in billions of USD per day and are calculated for the period between 1st of February and 15th of March. Here are the rankings:
A graphical representation of the top ten forex brokers by trading volume can be seen in the chart below:
- Forex.com – 15.5 Billion USD daily volume
Forex.com is the trading name of Gain Capital and has been one of the major forex brokers in the world in the last decade.
Thanks to the downfall of FXCM, Forex.com has become the largest broker in the world by daily volume of transactions, after acquiring the client base from the former rival. While lacking a solid global footprint, the broker benefits from the huge US market which is closed to foreign competition.
The consolidation of the US retail forex market has resulted in only two big players left to share the entire market: Gain Capital and Oanda Corporation. This is why the two US brokers are some of the largest in the world despite of being unable to succeed in any foreign market. After large gains in trading volume thanks to the consolidation of the domestic market, the volumes of US brokers are expected to stabilize.
- XM.com – 13.4 Billion USD daily volume
XM is the most successful Cypriot broker, and now it is the second largest retail forex broker in the world.
Formerly known as XE Markets and owned by the parent company Trading Point Holdings Ltd, the broker was rebranded in 2013 and renamed to XM. Ever since, it experienced the fastest growth rate in the industry being the only forex broker with three digits growth rates for two consecutive years.
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XM received worldwide praise for its state of the art execution technology, being awarded the ‘Best Trading Execution Broker’ in 2013 in Lagos, Nigeria, as well as ‘Trading Platform With Best Execution’ in Guangzhou, China. The broker is very popular among day traders and high volume traders because of its combination of low spreads, excellent execution and high leverage.
- Saxo Bank – 12.3 Billion USD daily volume
Saxo Bank has been stable in the last year after recovering from the loss of volume generated by the SNB shock.
The Danish broker has lost its position as the largest forex broker in the world because of the big growth in volume of Forex.com as a result of acquiring FXCM’s clients and XM’s huge growth rate. The Danish bank seems to be able to keep a stable volume but has failed to grow in the last two years, as the competition in Europe and Asia is very strong and other brokers have proven to be much more dynamic.
- Oanda Corporation – 10.7 Billion USD daily volume
Oanda is the most popular US broker among the US online trading community, as it is known for its lower spreads compared to its US peers.
The broker had benefited from the ever decreasing competition in the domestic market and managed to grow its volumes on a steady base. However, as the US market has consolidated there are no visible growth opportunities for Oanda in the near future.
Just like Gain Capital, Oanda has been unable to expand successfully in other countries as the US regulation has led to brokers being noncompetitive in the global market, as there are much better options for non-US traders.
- Hot Forex – 9.5 Billion USD daily volume
Hot Forex (also known as HF Markets Ltd) is the largest forex broker in the Caribbean, being based in the island nation of St Vincent and the Grenadines.
Its Eurpean operations are carried under a Cysec license (Cyprus) while in the rest of the world it operates under the St Vincent license. Hot Forex has grown very fast in the last two years and has become the fifth largest forex broker in the world. With huge success in Asia, Africa and Europe, Hot Forex is poised to become the second largest forex broker in the world if last year’s trends continue, but continuing to grow at the same pace will be hard once you reach a certain size.
Hot Forex received the ‘Best Client Funds Protection Broker Award’ last year in Dubai, United Arab Emirates, as well as the titles of ‘Best Forex Broker’ in China, Western Europe and the Gulf.
- IC Markets – 8.6 Billion USD daily volume
IC Markets (International Capital Markets Pty Ltd) is the largest forex broker in Australia and one of the largest retail forex brokers in the world.
The broker experienced the second fastest growth rate after XM in terms of trading volumes thanks to its leading ECN network which connects traders with the best liquidity pool available to retail forex clients. As the broker with the lowest spreads and best trading conditions in the world, IC Markets is very popular among high volume traders and manages to generate huge daily volumes despite the lower total number of clients.
This is the preferred broker among day trading enthusiasts.
- IG Group – 7.8 Billion USD daily volume
IG Group is the largest CFD broker in the United Kingdom and one of the largest retail forex brokers in the world. In the last two years it didn’t experience significant changes in trading volumes and client growth.
- GMO Click Securities – 7.1 Billion USD daily volume
GMO Click Securities is the largest Japanese forex broker, although it is registered in Hong Kong.
It focuses primarily on the lucrative Japanese market and it has very little presence in other countries. Because of the low leverage allowed in Japan which is limited to a maximum of 25:1, the broker’s trading volumes declined in the last year.
- Pepperstone – 5.9 Billion USD daily volume
Pepperstone is the second largest Australian broker and it continues to expand its business across Asia.
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It has kept a steady growth rate in the last two years, although not as spectacular as its other two Ausrtalian rivals IC Markets and Direct FX.
- Direct FX – 5.4 Billion USD daily volume
Direct FX is the third largest forex broker in Australia. The broker has seen its popularity rise a lot in the last year amid growing volumes from Chinese traders who want to benefit from the security and expertise of a well regulated Australian broker. Direct FX is a popular choice for experienced traders because it offers a very advanced trading platform with many levels of market depth coupled with excellent execution and very low spreads.
This is why it has a very high average volume per client compared to other brokers.
Along with IC Markets and Pepperstone, it is one of the Big Three Australian brokers.
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