What is an IPO?

In December 2010 both Gain Capital and Forex Capital Markets had successful initial public offerings (IPO). An IPO occurs when a company first sells its shares to the public.

In order to go public a company must have the approval of the Securities and Exchange Commission (SEC). The company obtains that approval by submitting an S-1 document which is its full disclosure document. Once the SEC appproves the S-1, the company is given permission to hold an IPO.

Next is shareholder approval. The company is private prior to the IPO and its investors must also approve moving forward with the IPO. The IPO process is a difficult one but beneficial if a company can complete it successfully.

Picking an Exchange

The New York Stock Exchange (NYSE) is an actual exchange with a physical location, while the NASDAQ is an over-the-counter (OTC) market with no physical location but where trades are conducted electronically. A company pays NASDAQ about $160,000 every year to be listed on its exchange.

Part of the IPO process entails selecting the exchange through which its stock will be traded. In addition, its trading symbol must also be selected. Forex Capital Markets Inc., for example, trades on the NYSE under the symbol FXCM, while Forex International Trading Corporation trades over-the-counter as FXIT.

Why Do Companies Go Public?

An IPO enables a company to tap a large pool of investors to provide it with capital. When a company goes public the cash collected for the newly-issued shares goes directly to the company's coffers.

Once listed on its exchange, the company is able to issue additional common shares via a secondary offering and raising even more cash. This ability to quickly raise large amounts of capital from the market is a key reason many companies go public.

Besides raising capital for expansion, research and development, debt service, or mergers and acquisitions, there are other benefits to being a public company:

• Awareness - Going public raises awareness for the company. It increases its profile, prestige and avenues for publicity.
• Investor Equity - It increases liquidity for investors, employees, officers or directors who own stock in a private company which goes public. Going public enables these individuals an opportunity to sell their shares and reap the rewards of all their hard work.

Which Forex Companies Are Publicly Traded?

Many publicly traded banks, which already offer institutional currency exchange, also offer retail Forex trading, although the minimum deposit is usually $10,000. Here is a partial list of publicly traded Forex companies:

• FXCM (NYSE:FXCM) recently acquired ODL Group Limited with its already strong UK and European presence and continues to expand its looming Forex empire.
• Gain Capital (NYSE:GCAP)
• 4XINT (OTCBB:FXIT) offers investors with a web-based trading platform.
• CitiFX Pro (NYSE:C) has aggressively stepped up its retail Forex marketing efforts in recent months.
• Interactive Brokers (NASDAQ:IBKR)
• J.P. Morgan (NYSE:JPM)
• dbFX Deutsche Bank (NYSE:DB) ranked by Euromoney as #1 Foreign Exchange House in the World.
• UBS AG (NYSE:UBS) operates in more than 50 countries and from all major international centers but is having problems maintaining spot FX market share.
• Knight Capital Group (Nasdaq:NITE) operates Hotspot FX.

Which Forex Companies Are Likely To Go Public Next?

As the Forex market matures and regulatory issues are clarified, it is more likely that more Forex companies will choose to go public. In our opinion, these are some likely candidates:

• Forex Club, Inc. 500's Fastest Growing FX Broker of 2010, is poised to go public with the appointment of new CEO Rafael Carrascosa.
• Interbank FX (IBFX) continues to win industry awards and increase its international trader base of more than 29,000 clients in 140 countries.
• Global Forex Trading (GFT) was founded in 1997 and serves customers in 100 countries worldwide. Their DealBook FX trading platform is one of the chief rivals to Metatrader.
• Alpari, operates in more than 150 countries with monthly trading volumes exceeding $147 billion.

If you've been following my blog posts the last couple of weeks, you know that I've been spending some time looking at what brokers have been doing about the new Compliance Rule 2-43(b) which requires an FDM to offset positions in a customer account on a first-in, first-out basis, resulting in the prohibition of the trading practice known as "hedging."

Since CFTC imposed the new regulation, we have witnessed brokers and traders alike express their dissatisfaction with it. Next week I am going to spend some time talking about some of the misconceptions retail traders have about NFA and CFTC and how the roles of those organizations really impact their trading.

Here is what happened this week:

Friday, 22nd
Interbank FX joins other brokers with hedging alternatives for their customers.

Thursday, 21st
Are China, Russia, and Brazil getting ready to dump the dollar?
Tradeview Forex reveals its unique solution for their hedging clients.

Tuesday, 19th
CitiFX announced its mobile trading platform for iPod and Blackberry.

Monday, 18th
Currensee: A new way to learn and trade Forex.

Interbank FX won Forex DataSource's Trader's Choice Award. Forex Datasource is a market research and information portal serving the retail Forex industry. Over a year long period, the firm polled more than 1,000 traders from more than 80 countries asking them to rank brokers using a numeric scale from 1-10 with ”10” being the highest rating and “1” the lowest. More...

While everyone is trying to figure out what's up with the dollar, there's still a lot of stuff going on in the Forex world lately.  Here are some highlights:

»  An interesting report from Greenwich Associates reported that currency trading experienced an unprecented boom in 2008.  More...

»  FXCM opened an office in Dubai.   Those guys are growing like weeds.  I think that's more than 45 offices worldwide.  More...

»  Want more proof that FXCM wants to dominate worldwide?  The are now opening a desk in Germany.  More...

»  Now there’s an online community based in Boston’s historic North Endwhere forex traders can collaborate, share strategies, educate oneanother about the opportunities and risks of currency trading, andexchange kudos (or sympathy notes). It’s called Currensee.  More...

»  Kishore Mahbubani, Dean & Professor at the Lee Kuan Yew School of Public Policy answered the question, "Are China's U.S. Dollar reserves at risk of inflation?" on BigThink.  More...

»  Interbank FX President and Chairman Todd Crosland was named Utah Business Magazine's CEO of the Year.  More...