CMC Markets forecasts 20% drop in FY revenues from CFDs and spread bets

Maria Nikolova

The forecast represents a downward revision from previously guided decline of 10-15%.

Lower volatility, range bound markets and the recently introduced restrictions on CFD offering to retail clients are set to dent revenues of online trading company CMC Markets Plc (LON:CMCX). The company has earlier today published an H1 2019 Pre-Close Trading Update.

After a robust first quarter, the second quarter has felt the impact of a sustained period of low market volatility and range bound markets towards the end of the traditional UK summer period, in addition to an expected decrease in overall client trading activity following regulatory change, the broker explains.

As a result, net operating income for 2019 is expected to be below previous guidance, with the overall impact on profitability partially mitigated by tight cost control.

The implementation of the ESMA measures has led to a drop in UK and European retail client activity. But the broker adds that after just two months it remains too early to draw any real conclusions as to how clients will adapt to the new rules. Taken alongside the aforementioned reduction in market volatility and range bound markets during a period of the second quarter, CFD and spread bet revenue for the full year is now expected to see a c. 20% reduction year-on-year, below previous guidance for a 10% to 15% reduction year-on-year.

On the brighter side, CMC Markets said that it continues to deliver on its strategy, having successfully completed the implementation of the white label stockbroking partnership with ANZ Bank in Australia as expected. This is poised to drive growth and further diversify revenues. In July, 103 intermediaries were migrated to CMC’s Stockbroking platform and, in September, ANZ Bank’s retail stockbroking clients were successfully migrated.

Furthermore, in response to client demand, MT4, the foreign exchange platform, will be launched in Q3 2019.

CMC Markets added that it keeps a strong focus on operating costs. Investments in strategic initiatives to drive future growth are ongoing, however discretionary spend around staff and marketing costs is now set to be lower than previous guidance. As a result, 2019 operating costs are now expected to be just slightly higher year-on-year, partially mitigating the overall impact of Q2 2019 revenue performance on Group profitability for the full year.

Throughout the Period (July 1, 2018 – September 25, 2018), the broker remained focused on increasing the proportion of UK and European revenue generated by professional clients (where the criteria are met). On a rolling 12-month view over 40% of UK and European revenue is now generated by professional clients, in line with previous guidance. Including institutional business this increases to 50%.

Read this next

Institutional FX

Deutsche Bank goes live with its FX pricing and trade engine in Singapore

Deutsche Bank has gone live with its electronic foreign exchange pricing and trading engine in Singapore, where demand for currency trading among institutional players is on the rise.

Retail FX

CySEC extends the suspension of Depaho license until November 19

The Cyprus Securities and Exchange Commission (CySEC) has decided to extend further the suspension of the license of the Cyprus investment company Depaho Ltd, which operates the retail FX brands GTCM, FXGM and TRADEAPP.

Retail FX

CAPEX.com introduces QuantX, a tool to build automated portfolio

Multi-licensed broker CAPEX.com has rolled out a new portfolio platform, QuantX, which uses a client’s risk tolerance assessment and other criteria to create fully customized investment portfolios.

Digital Assets

Ripple scores major win: Judge orders SEC to explain…a lot

The SEC is ordered to explain, among other things, how the Howie test applies to XRP, what is the status of Ether and Bitcoin, and the sale of XRP as investment contracts.

Retail FX

Trade CFDs on 900+ of the Biggest Companies this Earnings Season with HotForex

Traders with the internationally acclaimed multi-asset broker HotForex can trade CFDs on the stocks of over 900 companies during Earnings Season with tight spreads, flexible leverage, negative balance protection and the many other advantages that have made it an honest, open and transparent broker of choice to over 2.5 million traders around the world.  

Digital Assets

Polygon (MATIC) double spend bug yields $2 million bounty for developer

Polygon, the Layer 2 solution on top of Ethereum, has recently paid out the highest ever bug bounty in history to a whitehat developer Gerhard Wagner for pointing out a double-spend bug in the network which could have resulted in huge losses if it had been exploited.

Digital Assets

KuCoin aims to become largest social trading platform in crypto

KuCoin was founded in September 2017 and it currently provides Spot trading, Margin trading, P2P fiat trading, Futures trading, Staking, and Lending to its 8 million users in 207 countries.

Digital Assets

Apifiny’s crypto trading network adds Instant Transfers for best bid and offer

Instant transfers significantly enhance Apifiny Connect, allowing traders to more efficiently buy and sell on 25 connected markets across six continents.

Retail FX

iFOREX clients can follow two experts trading in real time

Trading Rooms’ access will be free of charge for active traders who open an account with the broker.

<