A wave of buyouts and mergers were seen in the USD5.3 trillion foreign exchange market. According to analysts, the need to consolidate had been seen as a necessity in order to reduce costs in relation to more stringent financial regulations.
FXCM Inc had been seen leading the consolidation trend. United States' largest retail currency broker just bought a controlling 50.1% stake in American retail accounts of Alpari U.S. LLC and rival Faros Trading LLC.
Chief executive Drew Niv told Bloomberg on a September 30 interview, "In a world where regulation is very heavy, essentially scale is king. The guys with the biggest scale are going to win that race."
Meanwhile, hedge funds had been closing due to the recent drop in currency volatility levels. Moreover, the 2010 Dodd Frank Act had required currency trading services firms to have a minimum of USD20 million capital. In the European Union, amendments to the Markets in Financial Instruments Directive had pushed up already high dealer or broker costs.
FX Concepts LLC, touted the largest currency hedge fund in the world due to its USD12 billion worth of assets it had handled in 2009, had just closed its investment management unit. The Global FX Volatility Index of JPMorgan Chase & Co had faltered from 12% in July to 8.49% today.
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