Forex in France. A Large Country, but a Small Number of Traders?

France is home to more than 67 million people. In terms of population and its area, it is one of the largest countries in Europe and one of the biggest economies worldwide. However, it appears to be relatively small when it comes to the retail Forex (FX) and Contracts for Difference (CFD) market.

According to current data, less than 40,000 people are actively trading in the Republic. This is far less than in neighboring Germany or Poland, where the retail FX/CFD industry is much more developed.

This article will find out what the French retail CFD industry looks like, the magnitude of trader's activity, and how the level of deposits and withdrawals have changed in recent months.

France Is Currently the World's Sixth Largest Economy

France currently ranks as the sixth-largest economy in terms of nominal gross domestic product (GDP). According to the International Monetary Fund (IMF), the indicator's value was over $2,870,152 million in recent years, slightly below the UK, which is fifth on the list.

Additionally, France ranks in the top 20 countries on the Human Development Index (HDI). It is a synthetic measure describing the degree of economic and social development of a selected country. In a nutshell, it describes in which country people live the best.

In addition, France is home to one of Europe's largest stock exchanges, Euronext Paris. With capitalization exceeding 4 trillion dollars, it is the second largest after the London Stock Exchange. It derives from the tradition of the Paris Bourse, founded back in 1724, almost 300 years ago.

The long-standing tradition of capital market development means that many private and retail investors are actively investing in France. Over the past three years, the Republic has added 1.1 million new traders. In the last quarter of 2021, around 743,000 people were actively trading.

"French traders give a lot of importance to their funds security (segregation of broker's bank accounts, negative balance compensation, insolvency protection). They are historically much more likely to choose a broker which offers more client protection systems, than another broker which will offer potentially better trading conditions, but less protection," said Jens Chrzanowski, the Chief Value Officer and a Member of the Management Board at Admirals Group AS.

"The same applies to regulation, which is very important to French traders. This often leads them to the choice of brokers which have the best reputation and/or experience. Furthermore, a broker with a local presence (physical office) will probably be a game-changing point, even if trading conditions are worse," he added.

As Chrzanowski revealed, he believes that the number of people owning shares in France is far greater than those actively investing in the stock market each quarter, at around 4 million people. Interestingly, only a modest percentage of this sizable number is interested in over-the-counter (OTC) markets, including CFD trading.

38 Thousand Retail FX/CFD Traders. Not Many, but Still the Most in History

According to data released by Investment Trends, around 38,000 retail traders were trading in leveraged OTC markets by June 2021. However, this is far less than in neighboring Germany, where 84,000 people were actively trading during the same period.

The FX/CFD market is also more prevalent in far smaller Poland, where around 50-60,000 people trade. However, as Lorenzo Vignati, Associate Research Director at Investment Trends, revealed, this is still the highest figure since the statistics were kept.

"An estimated 38,000 unique individuals placed an OTC leverage trade in the 12 months to June 2021, and intend to continue trading, the highest since the inception of our study of the French market in 2012. This includes 12,000 self-assessed crypto traders and is consistent with numerous market events (and trading opportunities) through the year. Of significant note, also French online investor numbers (those who have traded direct cash equities or ETFs) surged during the pandemic," Vignati commented.

It is worth noting that Contracts for Difference have gained a fair amount of popularity thanks to cryptocurrency traders who are no longer typically interested in Forex-related instruments, but CFDs on digital assets.

Due to historically record low-interest rates, more people have turned to leveraged markets. As a result, traditional forms of saving no longer work, and the French have started to look for alternatives.

"While traditionally, French investors have been more savers than investors, in our latest French Online Investing Report we observed that the positive market outlook in a zero interest rate environment was absolutely a powerful attractor for conservative yield-chasing French savers," he added.

5,000 Euros on Average Fund French Trader Account

Data from cPattern shows that the retail investor in France's leveraged markets deposits an average of €5,000 in their trading account, withdrawing an average of €3,330 over the same period.

The median for 2021 (data up to November), on the other hand, shows that these figures are slightly lower: for the average monthly deposit, they are €4,000 and for the average monthly withdrawal €2,000.

The "French market is similar to the markets such as Germany, Italy and Spain as clients are very professional and they are very much driven by algorithmic trading. (…) Popular products are stocks, stock indices and commodities. France is quite restrictive when it comes to CFD products and hence many firms do not do any advertising or solicitation of clients in France. The country is, however, also a good market for listed derivatives. We have seen a higher interest towards exchange-traded products such as futures and options as regulators are less concerned about exchange-traded products given there is greater security and transparency," said Ingmar Mattus, the Co-Founder, Executive Director & COO at Tickmill Group.

The first time deposit (FTD) also stays at relatively low levels compared to other developed countries. According to aggregate data for the period from January to November 2021, this value averaged €674 (median €628).

This compares with around €750 in the aforementioned Germany and over €1,000 in the UK. A similar value was reported in Australia, located on the other side of the globe (over €1,000).

The Pandemic Has Changed the Investment Market, Including in France

The Finance Magnates interviewees unanimously agreed that the two years of the pandemic had a significant impact on the financial markets. Not only in terms of more new clients, but also higher volumes and changes in trends regarding the most popular instruments.

The "CFD market benefited enormously from the pandemic as did most other financial markets. We saw large increases in the amount of new onboarded clients, trading volumes and client assets. Last year, growth stabilized slightly. Improvement of crypto CFD trading conditions and addition of new unique products will help to maintain that growth trajectory and enable firms in our space to take back some market share that over the last few years was lost to offshore crypto brokers and exchanges. We are also looking more and more actively into introducing completely new CFD products that have not been available to retail clients thus far," Ingmar Mattus added.

Moreover, Admiral Group AS sees essential market developments. Still, according to Jens Chrzanowski, they need to be divided into two groups of traders: those who are interested in volatility and short-term profits, and those who invest in stocks for long-term results.

"The pandemic and the market-related news in the mass media during the pandemic period made many short-term traders realize, that extraordinary market conditions give opportunities. Many of them started to trade during this period or increased their involvement.

"Stock investors who already own shares with their bank realized, that when markets are bearish they can short-sell CFDs to compensate losses on their securities accounts," Chrzanowski explained.

Thus, the pandemic made different types of investors interested in FX/CFDs in France, but with distinct purposes. However, the figures we mentioned above clearly show that the market is still not fully saturated, and brokers still have the opportunity to acquire new clients.