GAIN Capital Holdings (GCAP) has been making new 52-week highs this week. It's not a well known name so we wanted to provide some color on what they do and talk about some of the recent developments at the company.
In case you're not familiar, GCAP is a provider of online trading services for multiple asset classes. Its primary business is FOREX.com, which gives retail investors access to a variety of global OTC financial markets, including forex, precious metals and CFDs on commodities and indices. The company also operates GTX, an independent FX ECN for hedge funds and institutions and OEC, an online futures broker.
GCAP offers its customers access to a diverse range of over 12,500 financial products, including spot foreign exchange, or forex, and precious metals trading, as well as "contracts for difference", or CFDs, which are investment products with returns linked to the performance of underlying assets. GCAP offers CFDs on currencies, commodities, indices, individual equities, bonds and interest rate products. It also supports trading of exchange-traded futures and options on futures on more than 30 global exchanges.
GCAP operates its business in three segments. Through its retail segment, it provides retail customers with access to a range of global financial markets, including spot forex, precious metals, spread bets and CFDs on commodities, indices, individual equities and interest rate products, as well OTC options on forex. Its institutional segment provides agency execution services and electronic access to spot and forward foreign exchange and precious metals markets via its ECN (Electronic Communications Network) called GTX. Its futures segment offers execution and risk management services for exchange-traded futures and futures options on major US and European futures and options exchanges.
The company has been quite active on the M&A front in recent years as it has made 10 acquisitions over the past five years. These deals have provided GCAP with scale, a wider product offering, increased diversity of revenue streams, and a broader geographic footprint. Examples of some of its larger deals include: In 2013, GCAP acquired Global Futures & Forex (GFT), a provider of retail forex and derivatives trading services. Then, in 2015, GCAP acquired City Index, an online trading firm specializing in CFDs, forex and UK spread betting.
In terms of more recent activity, in early 2017, GCAP acquired the client base of FXCM's US operations. It has since successfully migrated these customers to GCAP's retail brand FOREX.com. GCAP transferred over 47,000 accounts with total assets of approximately $142 mln. Following GCAP's acquisition of FXCM's US customer base, FOREX.com is now the largest provider of retail FX in the US, with over 70,000 customer accounts. GCAP is also one of the largest providers of retail FX & CFD trading services globally.
As a result of these M&A deals, the company is now well positioned to focus more on organic growth in the near term. Its organic growth plan is focused on growth, diversification and margin enhancement. GCAP wants to grow share in markets where it already operates, wants to introduce new products and services to diversify into new markets and new client bases. In terms of specifics, GCAP is redesigning its trading experience with upgraded mobile apps, enhanced tools and trade ideas; easier account opening and more funding options for clients. It's also launching a global cross-brand affiliate marketing program.
In sum, GCAP is a name to keep on the radar in 2017 as the expected rate increases should create some volatility in the currency/commodity markets. Volatility in the FX or commodity markets is good for GCAP as it results in more trading activity and, thus, more commission revenue.