After we reported last month that Leading Forex ECN ICAP reported its lowest spot Forex volume in more than six years (Dec 2011) at $95.6 billion of average daily volume on its EBS platform, ICAP has now reported that January 2012 wasn’t all that much better, at $116 billion – down 23% from January last year. (For the ICAP press release click here).

While we do believe that some of the decrease at ICAP is loss of market share to smaller competitors and (relatively) new entrants to the Forex ECN business, in our opinion most of the blame lies simply in continued depressed FX volumes, due (mainly) to waning volatility.

This industry decrease comes at an interesting time for competitor FXall, which is preparing to price its IPO this week – possibly as early as this afternoon. FXall also reported, in its updated IPO “red herring” prospectus, falling volumes during Q4 in its “active trading” Forex ECN division to the tune of a 20% decrease. And at the same time, FXall will be attempting to go public at a significant valuation premium to retail FX firms FXCM and Gain Capital. Stay tuned….

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