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Foreign Exchange

FX earnings round up: Saxo Bank and FXall

Saxo Bank failed to convert a 24% rise in monthly FX volumes in the second half into increased revenues as a result of the squeeze in margins across the FX industry, according to estimates from FX industry analysis site, LeapRate.

FX volumes at the Danish bank were estimated to have risen $275 billion per month in the second half of last year, up from $222 billion in the first half of 2011. At the same time, despite the rise in FX activity, Gerald Segal, CEO of LeapRate, estimates revenues were down 11%, falling from $238 billion to $211 billion during the same period. Saxo’s pips-earned-per-round-trip trade were also reported to have fallen to a multi-year low of 2.55 in the second half of 2011.

“On a per-transaction basis, Saxo Bank is demonstrating a trend we have seen at a number of other FX firms, as well as FX ECNs,” says Segal.

“An increasingly competitive environment in which FX firms are lowering spreads to attract and keep clients are lowering margins.”

Overall, the Danish bank reported a rise in operating income of more than 6% year-on-year to DKK3.53 billion – about $634 million.

Saxo’s net profit was DKK618 million, down 4% from the previous record year, though the bank said in a statement that a stream of business investments during the year increased staff costs and administrative expenses by 12%, offsetting a rise in net income.

FXall reports earnings for first time after IPO

Meanwhile, leading multi-dealer platform FXall released its annual report on Thursday that showed total revenues for 2011 increased 19.4% to $118.3 million from $99 million in 2010. Net income increased 23% to $26.1 million from $21.2 million.

However, margins at FXall have also come under pressure, as competition has mounted. The report showed the amount of money FXall earns per million-dollar traded on its platform has been in steady decline since 2010.

The average transaction fee for active trading on the ECN platform – used primarily by banks, broker-dealers, hedge funds and prime brokers – is now $6.61 per million dollars, down from $7.15 at the end of 2010.

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