Yet another small forex dealer is getting out of the U.S. market. HotSpot FXr is closing down their retail fx business and selling their customers to FXCM. This would be the third forex dealer that FXCM has feasted on this month.
FXCM Acquires Certain Assets of Hotspot FXr’s Retail Forex Business
The consolidation of the retail fx industry in the U.S. has dramatically accelerated in the last few weeks with ACM, ODL and now HotSpot departing.
HotSpot’s case is particularly interesting. They are owned by Knight Capital which certainly has plenty of cash to meet the $20 million requirement. But apparently their retail business isn’t large enough to justify their continuing operation.
Again, this is why a firm’s net capital number is so important. Many thought that because HotSpot was owned by Knight they didn’t need to report a lot of capital. But it turns out that Knight was not willing to fork over the money needed to keep Hotspot FXr a going concern. At the end of the day, HotSpot’s net capital number was a spot on indicator of the firm’s viability. Taking nothing else into consideration, their number gave off the impression of a firm struggling to stay afloat. So in the end is it really a surprise that their retail business sank to the bottom of the ocean?
Once again, traders should be aware of the risks you take by trading with a forex broker with net capital below $20 million. As we are seeing smaller forex brokers are liable to close up shop giving their customers very little notice. Here today, gone tomorrow.
Or in HotSpot’s case, gone in two weeks time…