In green, countries whose currency increases against base currency USD. In red, countries whose currency decreases. Tip if you want to travel : go to the countries in red, you will have more with your money than in the past. A lot of traders think that a big broker is better than a smaller one because a larger company has many advantages such as economies of scale, a better liquidity position and is the subject of higher scrutiny from the public and the regulators. While this basic assumption has some merit and to some degree “bigger is better”, it is not a total correlation between size and quality of forex brokers.
If you want to find out which are the biggest forex companies in the world, you should continue reading this article. However, if you want to know which are the best forex brokers in the world when it comes to trading conditions and customer satisfaction, you should check our special forex brokers ranking. How to measure the biggest forex companies When it comes to measuring the size of a company, there are several criteria that are generally used. The most common criteria used in ranking companies by size are market capitalization, revenue and profits. Also, when it comes to financial companies such as banks or insurance companies, another way to measure size is by comparing the total assets under management.
This would leave most forex brokers out of the ranking. It is also important to note that market capitalization represents the value investors give to a specific company. A small but profitable company can have a higher market value than a large company unable to generate profits. Revenue – While ranking forex brokers by revenue will render more accurate results, this criteria is still far from being relevant in this particular case.
A broker’s revenues will come from the commissions it charges and the spreads the traders have to pay. A broker with higher commissions and spreads will generate more revenue than a similar sized broker with lower spreads. There is also the problem of integrated products offered by the companies. Profits – Ranking forex brokers by profits is totally irrelevant, as this criteria includes the same problems we identified when discussing about revenues, and many more. Just think about a large company with a bloated business that has huge operating costs. It can be a really big company but generate no profit.
In the case of forex brokers, the closest thing to AUM are the client funds. While they are not managed by the brokers, they represent the total value of the client accounts. This measure is much more relevant than the previous ones, but it still lacks the differentiation between the forex business and the other services offered by the company. Considering the above mentioned criteria are irrelevant when judging the size of forex brokers, we must come up with a measure that is more relevant to this specific business.
In this case, we think that the most relevant criteria to rank forex brokers is by the average volume of daily transactions. The daily transactions of a forex broker can vary a lot, but the more active clients the broker has, the less volatile the value of daily transactions will be. In order to get a better idea about the real volume of a broker, it is better to calculate the average volume for a larger period of time, as daily and seasonal fluctuations will be less relevant. We noticed that all the high quality forex brokers are also large ones and have their AVDT of at least three billion dollars.