After GAIN Capital announced that it is preparing to phase out its City Index brand during the company’s latest earnings call, we knew that the broker’s management team has a new view on the market. All that was left was for us to reach out to the company’s CEO Glenn Stevens and get the details.
In the following lines, we elaborate on his thoughts about the industry-wide impact of recent regulatory changes in the market. He also shared some details about the new (which is at the same time old) brand that the company will start to roll out globally in Australia later this year.
Capitalizing on the corporate image of the parent company of two major brokers in the industry (Forex .com and City Index) was elusive for the New York-listed firm until now. The news that GAIN Capital will be the new professional-oriented service of the company is opening a new opportunity to invest in a newly built and long-term sustainable offering.
“The GAIN Capital retail brand is an integral part of our 3-year growth strategy. On the back of extensive market and customer research we confirmed that there is considerable strength and credibility in the GAIN Capital name globally, and it affords the opportunity to attract experienced, active traders on a global level and expand into new product & services and new customer segments in the future,” Glenn Stevens explained to Finance Magnates.
STP Offering on the Cards
With the orientation of GAIN Capital to more experienced, professional traders, the offering that GAIN Capital is planning to deliver to the market is likely to be complemented with new products.
Stevens shared that the GAIN Capital brand will be built on the company’s existing City Index offering and its global regulatory footprint, but the firm is preparing some enhancements to create a truly differentiated service tailored to the needs of experienced traders.
Existing customers of City Index are not supposed to be affected in any way by the branding strategy change. With a diversified product mix, however, clients might gain access to better trading conditions and an expanded product mix.
The GAIN Capital Brand
The obvious advantages of having GAIN Capital’s brand are associated with the fact that the name is the same as of the NYSE-listed firm. But that is not the sole reason for the changes which the broker is planning.
“Leveraging the GAIN Capital name as a retail brand enables us to fully leverage our reputation as a trusted, well-capitalized global provider. It is also an opportunity to create a modern retail brand identity for GAIN Capital that can grow with us into the future,” said Glenn Stevens.
ESMA Changes to the Market
We also asked Stevens which industry trends he saw over the past months, especially in light of the new regulatory framework in Europe. He has no doubt that the ESMA regulations have had an impact across our industry.
“We’ve seen several of the largest UK brokers report material decreases in active accounts and volume since the new regulations came into force, but the top tier brokers are large enough and have enough geographic diversity in their businesses to weather this change,” the CEO of GAIN Capital elaborated.
The company has been one of the firms in the industry that has also been affected. A couple of days ago a report that trading volumes declined by 50 percent year-on-year circulated across the wires. Despite this, Stevens is upbeat about how the company handled the transition.
“Our team did a solid job navigating the new ESMA regulations; we were able to minimize the impact and protect the majority of revenue from our clients in the UK and EU by successfully focusing on our professional clients,” he stated.
Year of Consolidation
In the views of Stevens, there will be further consolidation in the industry, especially in the UK and Europe, as the full impact of the ESMA regulations becomes known. Second and third tier brokers who don’t have the necessary scale, regional diversity, or balance sheet to withstand the lower client activity due to the leverage restrictions will be most affected.
“For GAIN though, as we think about our business in 2019 and beyond, we believe the key to unlocking further value is first and foremost by making investments to accelerate organic growth. We also have a strong balance sheet which will allow us to take advantage of attractive M&A opportunities should they arise,” Stevens elaborates.
Despite the company’s commitment to organic growth, he did highlight that the firm could be on the lookout for more acquisitions provided that the prices are attractive. With the industry being traditionally behind the curve on reevaluating strategic options, the ongoing decline in Volatility could exert additional pressure on brokers to sell their client portfolios.
