GAIN Capital marks rise in income, drop in revenues in Q2 2018

Maria Nikolova

Lower volatility environment in the quarter ended June 30, 2018, weighed on revenues which staged a 7% drop in annual terms.

Online trading major Gain Capital Holdings Inc (NYSE:GCAP) has earlier today posted its key financial and operating metrics for the second quarter of 2018, with the company seeing a steep rise in income but a drop in revenues as a result of lower volatility environment.

GAIN reported GAAP net income of $67.1 million, or $1.47 per share, for the three months to June 30, 2018. This is substantially higher than the net income of $16.1 million registered in the first quarter of 2018 and the $13.9 million in net income posted in the second quarter of 2017.

GAAP net revenue amounted to $84.2 million in the second quarter of 2018, down 7% year-over-year. Glenn Stevens, CEO of GAIN, commented: “Despite the lower volatility environment during the second quarter, our results for the first half of 2018 remained strong with net revenue from continued operations increasing 29% year-over-year, demonstrating our early success in executing on our strategic priorities to deliver more sustainable returns and drive growth”.

Mr Stevens also highlighted the benefits of the sale of GAIN’s institutional GTX ECN business. On June 29, 2018, GAIN completed the sale of the Company’s GTX ECN business to Deutsche Börse Group via its FX unit, 360T for a total purchase price of $100 million. In connection with the closing, the Company received approximately $85 million, net of taxes and transaction-related expenses and fees and recorded a pre-tax gain on sale of $69.6 million. Net proceeds are set to allow GAIN to invest in organic growth and provide increased financial flexibility to pursue M&A opportunities, return capital to shareholders via our stock repurchase program, and reduce debt.

With regard to the new ESMA/FCA regulations, which are set to come into effect on August 1st, GAIN said it expected the impact from the new rules on its business not to be material.

The company reiterated its commitment to investing in new products and services. A new web trading platform is set to launch in August after a successful UK Beta program. The broker is also upgrading its existing MetaTrader offering to include MT5.

Further enhancements to mobile apps are in store, as these apps now account for 57% of customer volume. Speaking of mobile apps, let’s note that GetGo is about to be withdrawn from the UK/EU market, as a result of the new ESMA/FCA rules. The app is set to be launched in other jurisdictions.

GAIN also mentions a Direct Market Access (DMA) initiative, Prime of Prime agency execution for high volume FX traders. This is scheduled to launch in the US market in the third quarter.

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