CMC Markets warns of 20% drop in trading revenue

abdelaziz Fathi

CMC Markets PLC (LSE:CMCX) warned of subdued financial markets and lower trading volumes in the second quarter of its fiscal year 2024. The listed broker joins other UK platforms complaining of a slowdown in market activity, which has compounded the effect of the regulatory crackdown. 

CMC Markets

The company reported that market conditions remained subdued throughout August, leading to a 20% year-on-year decrease in trading and investing net revenues. August, in particular, presented more challenges, with lower monetization of client trading activity due to a higher proportion of lower-margin institutional volume.

While there is potential for underlying market activity to recover, if the current market conditions persist for the rest of FY24, the broker anticipates that net operating income will fall between £250 million and £280 million. However, the company assured investors that its key performance indicators, such as client money, assets under management, and active clients in both trading and investing businesses, continue to show resilience.

Earlier in July, CMC Markets issued a trading update for the first quarter of the financial year 2024, covering the period from 1 April to 30 June 2023. As anticipated, the first quarter saw quiet market conditions, leading to a 15-20% year-on-year decline in client trading and investing activity.

Despite these conditions persisting into the beginning of Q2, the impact on client activity was mitigated by stronger interest income. Therefore, the overall net operating income remains on a similar trajectory as the same period last year.

At the time, CMC Markets said it expects to deliver a robust performance for the financial year ending 31 March 2024, with investment plans and operating expenses, excluding variable remuneration, expected to align with previous guidance.

CMC Markets PLC reported in June flat growth in revenues and customer income for the financial year 2023 as the market environment stabilised. The spread betting and online trading company reported its FY 2023 net revenue at £288 million, up two percent from £282 million a year earlier.

The company warned in its latest trading update of higher costs, prompting analysts to slash their earnings forecasts. Specifically, CMC’s operating costs for the twelve months ending March 2023, including variable remuneration, jumped by 24 percent to £236 million from £190 million in FY 2022.

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