FX market volumes continue to be hit by major structural changes across the market.
The big interbank players have basically ceased to take on any proprietary risk, leading to a big drop in volumes, and in many cases they have changed their market-making activities also. Most of the banks are acting now like pure broking operations only.
Hedge funds and professional traders have quickly adapted their trading styles to the new volume-reduced trading conditions. It’s now a case of taking your 50 pips and running.
The retail market is also going through some upheaval. Volumes are significantly lower across all of the big brokers and many traders have left the industry due to lack of opportunity/profitability.
It is not all doom-and-gloom, especially for the aspirational trader. The retail market seems to be finally making the realisation that it’s better to have a professional trader helping you out, rather than trying to become an expert in a difficult field. Those traders who are taking the time/trouble/expense to set themselves up as credible investment alternatives are finding a multitude of opportunities in the retail space.
My data suggests that successful signal providers are becoming more sought after than ever. In fact, prices are now starting to rise as many providers need to limit their number of followers (due to the obvious issue of slippage). Current prices seem to be topping at $100pm per follower, but I would not be at all surprised to see this price double or even triple for the very successful and credible providers.
The account management side in the retail space is still somewhat dis-organised but with more and more traders/managers now willing to take the necessary steps towards registration, I think we will see exceptional growth here also.
There are also plenty of opportunities in the institutional space and we are seeing interest from the biggest-of-the-big hedge funds to allocate funds to emerging talent. Finding the talent is always the tricky part. The big macro hedge funds are the new gateways to institutional investment funds and of course in order to increase, or even maintain, capacity they will need fresh traders coming through.
In short, we are seeing the beginning of a major shift in the FX industry on both institutional and retail levels. Both sides of the industry will concentrate on funds management roles, as dealers/traders drop out of the interbank and retail trading spaces. We will end up with a core of hedge funds and professional traders (probably numbering a few thousand) who will be the market makers and market movers of the future.
No point in fighting the change, just go along for the ride.