Last week, investors got IPO fever — that is, for hot Chinese offerings. The standouts included Youku.com (Nasdaq: YOKU), the “YouTube of China,” and Commerce China Dangdang (Nasdaq: DANG), the “Amazon.com of China.” The stocks soared 161% and 87%, respectively.

Of course, there were other high-quality offerings. Yet they got overlooked. But for investors looking for better valuations, these offerings could mean tidy profits.

Take a look at FXCM (NYSE: FXCM), which is an online trading platform for retail currency investors. The IPO came out at $14 and ended trading at $14.85 on its debut. The stock is now at $12.75.

Interestingly enough, foreign currency trading — which is known as FX — is actually the largest and most liquid financial market on the planet. Average daily volume is roughly $4 trillion.

While a large portion of this is from professional traders, banks and hedge funds, the fact is that retail FX trading is growing rapidly. A big help has been from Internet technologies and increased media attention. And more and more investors realize they need to take a global perspective on their investments. 

So how large is the retail FX market? Based on research from Aite Group, the size is about $125 billion. Keep in mind that this market was only worth $10 billion in 2001.

As for FXCM, it is a dominant player in the retail FX market with about 175,000 customers — and growth has been strong. The company has been smart to expand its platform into various countries in Europe, Asia and even the Middle East. In fact, about 76% of FXCM’s customer trading volume is from outside the United States.

As should be no surprise, the company’s technology is sophisticated, allowing for quick-paced trading. It is also available in 16 languages. FXCM also has rich content resources. Its flagship site, DailyFX.com, is one of the top three websites for the FX category. It attracts 500,000 unique visitors per month and more than six million page views. No doubt, this is an effective way to get new customers as well as create loyalty.

Even though FX trading is risky, FXCM has found ways to deal with this problem. For example, the company operates under an agency model. This means FXCM brokers trade among traders and as a result, has no credit risk. This is definitely a big advantage.

The primary revenue for FXCM comes from trading fees and commissions. From 2001 to 2009, the top-line has gone from $9.5 million to $322.7 million, which represents a 55% compound annual growth rate.

So how big can this market really get? One way to look at this is to compare it to the retail equity traders market. On a global basis, this market has 100 million people. The retail FX market has only 1.25 million.

Yet the fact is that FX is likely to remain a subset of the retail equity trader’s market. After all, the market is still complicated and meant for more sophisticated investors. But as seen with the growth in options trading during the past decade, the FX retail market should see substantial interest — and profits.

Action to Take–> FXCM might ultimately wind-up being bought by a larger brokerage operation, like Schwab (Nasdaq: SCHW) or TD Ameritrade (Nasdaq: AMTD). These firms need to find new revenue sources, and FX could potentially be an attractive market. Keep in mind that FXCM’s average account trades 2.3 times per day, which is much higher than the typical online equity trading account.

During the past 12 months, FXCM has generated net income of roughly $98 million. Based on its current market cap, this puts a reasonable price-to-earnings (P/E) multiple on the stock of about 10. If you’re looking for a reasonably-priced Chinese IPO that could eventually soar, FXCM just might be it.

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