As the forex trade booms, businesses are constantly coming under pressure from regulations. Large companies are now forced to put aside millions of dollars to cover future rigging expenses for investigations and maybe penalties that they might incur while transacting business. Still, regardless of the millions that companies fork out to pay for rigging charges, the market continues to grow by making a turnover of $5.35 trillion daily.
Royal Bank of Scotland
Recently, the Royal Bank of Scotland announced that they set aside some 400 million pounds for any future rigging fines that they might incur while working in the forex business. The Bank took the decision to put aside the funds after both Barclays Bank and Citigroup Bank in the US put aside amounts in the millions to cover rigging expenses. Barclays Bank put aside 500 million pounds to try to offset future expenses incurred from alleged forex rigging. Meanwhile, the US based bank Citigroup has set aside millions of US dollars as well to try to meet any future penalties imposed on them from alleged forex rigging.
Forex companies
As the forex market grows to new heights, most forex companies are jostling for greater profits. Just recently, Gain Capital (NYSE:GCAP), which is a leading forex trader in the US, took control of City Index by means of acquisition. Gain Capital paid a total of US$118 million to acquire ownership of the US$36 million City Index. A breakdown of the figures that gain Capital muster up to own City Index are US$20 million cash, US$60 million in convertible notes, and about US$5.3 million of Gain shares worth (or around US$38 million).
City Index in the meantime carries a US$73 billion worth of trading volume to its name. The company’s revenue total has declined from US$169 million since 2013 to drop to US$124.8 million. In addition, it has an EBITDA total of US$10.7 million and a US$344 million worth in customer assets, a decline from the US$400 million in 2013. Furthermore, City Index has an amount of 103,761 funded accounts in their retail section still on the books.
Eaton Corp. PLC went up higher in their third quarter profit margin to 18%. The company’s profit range forecast in 2014 went from as high as US$4.50 to US$4.70 to a plunge of US$4.55 to US$4.60 per share.
Earlier in 2013, Eaton Group went ahead and predicted a 3% growth in earnings but as sales continued into 2014, they later changed their stance to 2%. This 2% reduction in forecast came about because of the slow rate at which sales was going among their international stores outside the US.
Since the foreign exchange market was growing rapidly, Eaton Corp. was confident that their forex business section would continue to pick up rapidly. However, this was not to be the case as the company began to suffer from unfavorable currency rates happening in some countries, thus, making the euro weak against the strength of the US dollar. As Eaton Corp gears up for the remainder of 2014, they are expressing a need for stronger measures where productivity growth are concerned as well as their intention for express control to be tighter to try and combat the impact of negative exchanges happening in the forex market that are resulting in a lower market growth.
As the forex market grows, authorities continue their investigation into the movements of the big companies to decide whether these companies were manipulating the forex business for their own selfish gain. Meanwhile, companies large and small that deal in forex are continuing to watch the ever-booming market to try to find a route to making bigger profits.
