December 2, 2010 / 2:53 PM / in 9 years

Currency trading co FXCM rises in debut

NEW YORK (Reuters) - Shares of online currency-trading company FXCM Inc FXCM.N rose in their market debut on Thursday as investors bet that the company is well-positioned in a growing — but risky — industry.

The shares closed at $14.85, or 6.1 percent above their $14 IPO price. They rose as high as $15.34 on their first day of trading on the New York Stock Exchange.

FXCM, which runs the DailyFX.com website and provides individual investors access to the foreign exchange market, has about 175,000 retail and institutional customers globally, according to a regulatory filing. It is part of a burgeoning online trading industry that has benefited as individuals increasingly manage their own investments.

“Forex is a growing area, like options was about five years ago. Maybe that’s the next opportunity,” said Seth Dadds, an analyst at Baltimore-based equity research firm GARP Research.

“There’s a lot more risk to it and that might be one of the reasons the bigger brokers took longer to move into it,” he said, but added: “From a retail investor standpoint, the FX market is a huge market for hedging.”

Another online currency trading company, Gain Capital Holdings Inc, has filed to raise about $154 million on the New York Stock Exchange.

FX trading, traditionally dominated by large institutions, has over the last decade seen more retail participants as trading fees have dropped and markets have become more accessible via the Internet.

The retail portion of FXCM’s business accounts for more than 90 percent of its revenue but the company also has an agreement with Deutsche Bank AG (DBKGn.DE) to support its retail FX trading customers under the brand name dbFX.

“It’s not that it generates that much topline revenue or growth for them but it’s an endorsement,” said Francis Gaskins, president of IPOdesktop.com.

Total revenue rose 6.5 percent to $264.2 million in the nine months ended September 30. Net income rose 16.2 percent to $79.4 million in the same period.

Amid a tough and consolidating industry, some analysts have speculated that FXCM could be a takeover target and have cited as a precedent TD Ameritrade’s (AMTD.O) 2009 acquisition of ThinkorSwim, which brought big cost savings.

FXCM on Wednesday sold 15.06 million shares for $14 each, raising about $210.8 million. It had planned to sell shares for $13 to $15 each. Based on 75.3 million shares outstanding, the company sold about 20 percent of itself, giving it an implied total value of $1.05 billion.

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