OVERVIEW & ANALYSIS OF LEADING FIRMS

FXCM
Founded: 1999 Headquarters: New York, NY Website: www.fxcm.com Company Profile FXCM was one of the first U.S. online FX brokerages, and has grown to become one of the largest U.S.based firms, with more than $350 billion in monthly trading volume, 14 offices in 11 different countries worldwide, and more than three-quarters of its volume coming from international clients. Since 2007 FXCM has operated as an agency only firm, adding a markup to the prices provided by a series of thirdparty market makers. FXCM completed its initial public offering (IPO) in December 2010, listing its shares on the NYSE. Prior to going public FXCM was backed by investors including Long Ridge Equity Partners and Lehman Brothers Holdings, which acquired a 35% stake in FXCM from the bankruptcy estate of Refco in 2007. trading platform employees market maker / agency fixed spreads Regulation Proprietary and MetaTrader 700 Agency No U.S., EEA (U.K.), Hong Kong, Australia, Japan Our Comments FXCM is, in our view, the only U.S.-based firm which has successfully expanded to all major global markets, with 76% of its trading volume coming internationally. It was not an easy ride for FXCM it overcame the 2005 bankruptcy of Refco, FXCMs major outside shareholder, which at the time also acted as a White Label of FXCM and accounted for approximately 40% of FXCMs overall volume. Perhaps for this reason FXCM has shied away from outside providers of trading volume, with White Label firms responsible for just 3% of overall volume. FXCMs management team has been largely intact from launch more than 10 years ago, led by CEO Dror Niv. FXCMs claim that its agency model is better for customers (than the market-maker/principal model of most of its competitors) is not confirmed by FXCMs recently reported client profitability data. FXCM customers have consistently fared in the bottom half of all firms reporting, with only 24% of client accounts being profitable over the past year, well behind both the industry average of 28% and industry leader Oanda where more than 40% of accounts made money. Financial Summary and Key Ratios*
in $ millions, except volume and ratios

LTM
Client Funds Held Cash (excl Client Funds) Long-Term Debt Equity Capital Revenues Net Income Volume (mo., $B) Debt as % of Equity Cash Flow Debt Coverage Net Income Margin Cash / Client Funds Excess Capital $839 180 0 274 385 94 384 0% N/M 24% 21% N/A

2011
$641 193 0 268 360 100 327 0% N/M 28% 30% 204%

Pros + truly global firm Strong volumes in all major markets U.S., Europe, Far East, and rest-of-world. + transparency As a public company, reporting of all aspects of business greatly increases. + research Strong research presence, e.g., DailyFX website. + financials Strong capital and cash position, no debt. Cons regulatory issues $2.1 million in fines from the CFTC during August 2011, relating to price slippage and a delay in repatriating accounts from FXCM U.K. to the U.S. On a global basis, more than half of FXCMs overall volume or almost three-quarters of FXCMs volume outside the U.S. comes from clients in jurisdictions where FXCM is not licensed or authorized. variable spreads As an agency firm. poor client profitability record FXCM ranks near the bottom of major U.S. firms in client profitability.

* Some figures estimated. LTM to June 30, 2011.

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FOREX INDUSTRY REPORT 2011

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