The road to mini-success. (Online Trading).

Electronically traded mini futures contracts, such as the E-mini S&P 500, have become one of the industry's success stories. Combined with the fast-growing popularity of online regulated forex trading in general, is that an indication that the new mini-FX accounts being offered also could

A standard full-sized forex lot is 100,000 currency units. Mini-FX accounts are one-tenth the size, or 10,000 currency units. Brokers say these smaller accounts are designed for those new to online currency trading and those with limited capital. Coupled with the low margins of most e-forex firms - as low as 1% - the capital commitment for a single mini-FX trade can be quite low. Likewise, the minimum amount required to open a mini-FX account, although it varies by firm, is far less than that of a regular forex account.

Of course, as with other mini accounts, in commission trades you're usually paying the same rate for what amounts to less exposure - something that should usher mini-FX traders into regular accounts as they do well.

The first currently registered forex FCM to offer mini-FX accounts did so shortly after registration was first required. In February 2001, Forex Capital Markets (FXCM) rolled out its products, but it didn't see significant growth until after regulation started to take hold in the industry. The Commodities Futures Modernization Act (CFMA), passed just two months earlier, gave legitimacy to retail forex trading by requiring firm registration and giving the Commodity Futures Trading Commission oversight of these markets. Now several registered forex FCMs offer mini-FX accounts (see "Who's on board").

Marc Prosser, chief marketing officer of FXCM, says mini-FX trading accounted for less than 2% of FXCM volume in 2001. In 2002 it was about 6%, and he estimates for 2003 it will be between 12% and 15%. He says that FXCM currently has more than 6,000 active mini-FX accounts.

The statistics suggest that a growing number of traders are unfamiliar with currency trading or are not willing to put up the big money it costs to trade currencies, yet are still interested in trading them. The lower risk of mini accounts is behind their attractiveness, according to brokers.

"Given the average day in the market, the range of tick movement for the euro is about 100 ticks," Prosser says. "If you're starting out with an account with only $3,000-$4,000, you're probably in a much more comfortable position taking a $100 gain or loss than with a $1,000 fluctuation."

That low-risk appeal -- at least five firms say they decided to offer mini-FX accounts due to customer-based demand -- as well as the impressive growth of the E-mini futures contracts over the years have lit the road for mini-FX accounts. So far, it seems to be working. Other NFA-registered FCMs specializing in forex trading and offering mini-FX trading accounts say these accounts are are growing in popularity among traders.

Gain Capital is one of the more recent firms to offer miniFX. It began to offer these accounts in May 2003.

"We've had steady inquiries about mini[-FX] accounts over the past year," said Gain CEO Mark Galant. "We realize there is a large number of retail traders from either futures or stock markets who are interested in forex but do not have any previous experience trading this market."

GFS Securities & Futures got on board a few months ago in March. "It was very much a client-driven decision," says Robert Gray, director of global forex operations for GES. "The regulatory environment that the markets exist in now is really fueling forex in general."

At Xpresstrade, which started offering mini-FX accounts in mid-January 2003, the number of customer funds in regular forex accounts increased 45% in the second half of 2002, according to Xpresstrade Principal Daniel O'Neil. "We've really seen forex take off, and if there's anything holding back its growth it's that it's a completely new and different market and futures traders aren't familiar with it yet," he says.

"For a lot of futures traders, the forex market is something new," says O'Neil. "It's really popular, people have really received it with a lot of enthusiasm."

So while the main idea is that a trader with a mini-FX account will eventually move up to trading full forex accounts, there will always be those who need the "mini-intro" to the forex market.

It's still to soon to really tell how big these products will become over time, but if they mirror the achievements of the Chicago Mercantile Exchange's E-minis and that of forex trading in general, then the mini-EX is on a road to success.

WHO'S ON BOARD

While there are few registered forex FCMs (a little more than two
dozen). Several are offering or planning to offer mini-FX accounts.

Forex FCM                            Offered Since:

Alaron                                    June 2002
Capital Market Services                    Feb 2002
Forex Capital Markets                 February 2001
Forex Capital Markets                 February 2001
FX Solutions                             March 2001
Gain Capital                               May 2003
GFS Securities & Futures Inc.            March 2003
Global Forex Trading                   January 2003
Peregrine Financial Group      Rollout date not set
Xpresstrade                            January 2003