By the time the CFTC banned FXCM from the U.S. market in January 2017, the once-robust U.S. forex brokerage industry had already been whittled down to just 5 brokers.
Just prior to FXCM’s departure from the U.S., FXCM was the largest retail forex broker in the U.S., with 34% of the market (as measured by customer funds on deposit). Oanda was in second place with 26% of the market, and Gain Capital (aka Forex .com) was in third place with 24%. The remaining 17% was split between TD Ameritrade (11%) and Interactive Brokers (6%).
During the dissolution of FXCM-US, Gain Capital bought FXCM’s retail client book, which immediately made Gain the new number-one broker in terms of market share. The new numbers were: Gain 51%, Oanda 32%, TDA 11%, and IB 6%.
Since then, Oanda, TDA, and IB have been growing their shares of the U.S. market, at the expense of Gain. In May 2019, the shares were Gain 39%, Oanda 36%, IB 15%, and TDA 10% – with Oanda challenging Gain for the top spot, and IB overtaking TDA by a substantial margin.
Here are the May 2019 CFTC figures, displayed in table-format by Finance Magnates –
Note that “retail forex obligation” refers to customer funds on deposit in USD, and the “change” figure and the “change %” figure refer to those retail forex obligations.
Note also that the total market share in the bottom right-hand corner should read 100%, not 0%.
Here is the Finance Magnates article accompanying the table –
That’s quite the list there of brokers. Never thought I’d ever see Oanda listed with the other heavyweights. But there you go. They must be doing something right.
I see TradeStation in bed with Interactive Brokers now for FOREX (TradeStation International that is).
This is interesting for sure, as I have to chose a broker shortly.
I understand that this is primarily based on marketshare. While marketshare is a metric it does not explain or confirm the “savviness” or the reasons why the customers have chosen their particular broker. Marketshare can be garnered by good marketing and not necessarily by superior performance.
As a US citizen, I was leaning toward Oanda but their spreads seem to be much wider than Forex.com. I understand that this is not the only metric that I should consider and that spreads will vary during the time of day, how the “market feels” or what “forex-chow” has been fed to the media.
@Clint , as a new trader starting out with a micro account, who would like to keep it simple, what are your thoughts on one of these brokers from the nanny state (MM) vs “going off shore” .
If you intend to scalp or day-trade (which I do not recommend), spreads will be a critical issue for you – whereas on longer holding periods, spreads matter less.
If you intend to learn swing-trading first, which I recommend, then Oanda is a good choice.
For a new U.S. trader, about to take your first plunge into live trading, I suggest that you disregard the offshore market. You will have enough on your plate, without trying to contend with the extra complexities of trading offshore – the worst of which is the difficulty (deliberately thrown in your way by the CFTC) of moving funds back and forth between your stateside bank account and an offshore broker.
Initially, stick to the very limited choices you have in this country. If and when you become consistently profitable, and can manage your live trading without stress, then you might want to look around at the opportunities for better trading conditions offshore. But, that’s for the future.
For now, prove to yourself that you can consistently earn tiny profits, trading tiny positions, in a tiny account with Oanda or Forex .com. When you’ve accomplished that, then you can ramp things up, if you feel comfortable doing so.
I questioned that, when I saw the market-share figures, as well.
IG Markets began on-boarding U.S. clients in February of this year. To the best of my knowledge, they are building their U.S. clientele one customer at a time. Accordingly, I surmise that IG Markets has not simply “imported” tens of thousands of clients to their new U.S. subsidiary (as Gain Capital did in early 2017).
If I’m right about this, then it will take some time for IG to make a noticeable penetration into the U.S. market, and we will see them added to the market-share report when their numbers become significant.
But, all that is conjecture on my part. So, take it with the proverbial grain of salt.
If you intend to hold positions for several days (or longer), looking for gains of 100 pips (or more), then an extra pip (or a few extra pips) in spread will be a trivial cost, as a percentage of your potential gains.
One great advantage to trading with Oanda is the ability to trade in tiny position sizes – all the way down to one single unit of currency (if that suits your needs). This means you can start out with actual live trading, taking almost no risk, while making all your rookie mistakes in a totally non-threatening environment.
When you’ve gotten good at this live trading thing, then you can scale up to whatever size fits your personality and your trading capital.
