Saxo Bank releases volume information for the first time

And the figures are much lower than previously estimated.

With the recent issuing of its 2010 Annual Report, Saxo Bank has, for the first time, given us a glimpse at its monthly trading volume figures. Saxo reported that its average monthly trading volume in the second half of 2010 was $232 billion (DKK 1.3 trillion), down about 17% from $278 billion (DKK 1.7 trillion) in the first half of the year.

We had earlier reported that Saxo Bank’s revenues declined by 37% from first to second half 2010. (We also had estimated Saxo Bank’s monthly volume at $309 billion, based on revenue figures, well above the actual numbers).

What does this all mean? We draw a few conclusions:

- It pays to be a European broker. Overall, the European online trading business is much more lucrative than in the US. For example, we now know that Saxo Bank earns about 3.1 pips per (round-trip) volume, versus just 2.2 pips for FXCM and 2.4 for Gain Capital. Looking at this another way, Saxo and FXCM did almost an identical amount of volume in 2010 – yet Saxo’s 2010 revenues from trading activities were $475 million, while FXCM’s were just $346 million.

- More competition. Both overall volume, as well as revenue-per-volume, fell dramatically in the second half of 2010 – in Saxo’s case, a 17% decline in volumes resulted in a 37% decline in revenues. If this discrepancy was a result of less volatility in the second half of 2010, then we can assume that a rise in volatility (as we’re seeing in the first quarter of 2011) should see a return to former revenue and profitability levels. However, if increased competition is causing revenues-per-trade to fall, then we can expect the trend to continue.