Advanced Markets pulls out of US retail FX space

By:
Russell J. Dinnage
Published on:

Advanced Markets, a New York-based FX platform, is withdrawing its license as a retail FX broker in the US to focus on the institutional market.

The company – which now calls itself a pure institutional FX broker, according to CEO Anthony Brocco – filed documents with the National Futures Association (NFA) in the US and with the Commodity Futures Trading Commission (CFTC) on September 30 that will, pending CFTC approval, prevent Advanced Markets retail clients from buying and selling currencies through the firm’s systems.

The decision by Advanced Markets to end its status as a retail FX broker in the US means there are now only 13 day-trader centric forex firms operating in the country, according to NFA statistics.

 The current state of the retail FX market in the US

 
 Source: the National Futures Association; Forex Magnates.com

Advanced Markets founder Brocco says the company has long been positioned as a primary provider of wholesale liquidity, credit and direct market access (DMA) technology solutions to the institutional community of broker, bank and other, non-retail FX market participants.

"The majority of Advanced Markets’ business has always been institutional clients," says Brocco. "Our revenue from retail accounts has only been around 2% or 3% of our overall revenue, while 97% of our revenue has come from institutional accounts."

The company’s retail FX business was largely focused on managed accounts in which trading was handled by a third-party professional fund manager.

Brocco say that now, with the filing to relinquish the company’s retail licence, Advanced Markets can focus solely on DMA trading and credit solutions for the institutional FX space.

"We never really marketed to the retail space, or had a significant number of retail clients, we always were focused more on the institutional trader and also the retail broker," says Brocco. "We are a wholesaler provider of liquidity to brokers that have retail client bases. Many of the clients we have are in the retail business, but the relationships we have are with the wholesale and institutional communities."

Advanced Markets has 11 market makers that Brocco says are all leading banks, and every trade processed through the company’s platform is matched up to a bank showing the rate being requested.

Bank market makers and prime brokers on the Advanced Markets platform include Bank of America Merrill Lynch, Barclays, BNP Paribas, Commerzbank, Deutsche Bank, JPMorgan, Morgan Stanley, Nomura, UBS and Macquarie Bank.

"We do not have a deal desk, all of our flow is passed through to banks on an agency basis. Because we do not manage retail account flow or trade on a principal basis," says Brocco. "To work as hard as we would need to do on the retail accounts we had, the revenue generated was not worth it for us."

In May, Advanced Markets launched UltiMT, a multi-dealer FX platform, which gives wholesale clients access to the institutional FX market, as well as precious metals pricing and trade executions.

Going forward, Brocco says he hopes to focus more on growing the UltiMT platform offering, allowing Advanced Markets to recruit more brokers globally to the platform while also searching out more fund managers seeking liquidity in the FX market.

"We have created a really clean environment for people who are trading larger trade sizes as well as a really great solution for brokers who need liquidity to run their business," he says.

The company expects to record around $50 billion in monthly trading volumes in November and December, and a 10% to 15% increase in monthly traded volumes during the next two years, says Brocco.