Gain Capital revenues down as retail volumes halve

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Gain Capital reported a 26% fall in net revenues to $40 million for the third quarter versus the same time last year, as retail trading volumes collapsed amid lower market volatility.

In its quarterly report published on November 1, the margin forex broking firm said that revenues from retail business fell 52% to $34.3 million, compared to $52.2 million in Q3 2011. Total retail trading volume was $278.7 billion compared to $447.9 billion in Q3, 2011, as low market volatility reduced client activity, it said.

The firm did get a reprieve from its institutional business, including hedge funds, banks and high-frequency trading firms, which generated revenues of $4.2 million in Q3 up from $1.4 million in the same period last year. Institutional volume grew by 48% to $503.7 billion, compared with $260.0 billion in Q3 2011.

Gain said that despite quiet market conditions in the third quarter, active accounts in the period remained stable, decreasing 4% compared to Q3 2011. Client assets grew by 10.6% to $316.9 million as of September 30, compared to Q3 2011, with a stable base of more than 74,000 retail accounts globally.

The company said that in the fourth quarter, it will introduce new marketing campaigns to promote its enhanced retail offering, which includes an expanded portfolio of products delivered through its newly-introduced platform, Trade.

It said that it also expects a positive impact from a full quarter's contribution from additions to its institutional execution desk and its August acquisition of futures business online futures broker Open E Cry (OEC).

"The completion of the OEC acquisition and the expansion of our institutional business demonstrates our strategy of investing in our retail and institutional FX business lines, while growing and diversifying our revenue sources through both organic initiatives and strategic acquisitions," said Glenn Stevens, chief executive of Gain in Bedminster, New Jersey.

Gain's share price traded at the $4.50 level on November 2, a fall from a high of $7.46 in December last year. 

Rival broker FXCM is due to publish its results on November 8. 

Third quarter metrics
(Comparisons below are referenced to Q3 2011)

• Net revenue of $40.0 million, compared to $53.9 million
• Net income of $3.2 million, compared to $7.6 million
• Adjusted EBITDA of $6.2 million, compared to $15.6 million
• Adjusted net income of $3.6 million, compared to $9.3 million
• Total retail trading volume of $278.7 billion, compared to $447.9 billion
• Total institutional trading volume of $503.7 billion, compared to $260.0 billion

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