Forex and contracts for difference (CFDs) broker CMC Markets (LSE:CMCX) said on Thursday the planned regulatory changes across major EU markets regarding forex could affect client behavior and its own business operations.
The broker’s further operational performance is uncertain since it could be affected by the recently announced planned regulatory amendments in several key for the broker markets in Europe – the UK, Germany, and France regarding the ban on marketing and distribution of leveraged products.
“At this stage, it is difficult to quantify accurately the scale of impact that the proposed regulatory changes will have on client behavior, and therefore performance of the business, particularly as the final terms and timings of any changes are not yet finalized,” CMC Markets noted.
The broker said it supports a clear and consistent regulatory approach, but it will have to take steps in order to keep up with the ongoing industry changes and the competitive landscape. It will revamp its product offering by adding a limited risk trading account. It will also continue to offer guaranteed stop-loss order service. Earlier this week, IG Group also said it will introduce a limited risk account with no-negative guarantee, among other new services.
“The regulatory changes that will be implemented later in the year will undoubtedly present the Group with some short- to medium-term challenges as clients and the industry adjust,” CMC Markets CEO Peter Cruddas said. “However, […] I believe that in the longer term the Group’s competitive position will be strengthened compared to competitors whose business model is more focused towards inexperienced clients,” he added.
In October last year, the broker launched Knock-Out contracts for difference (CFDs) in Germany and Austria. Prior to that, these products were not present in its portfolio in the two countries. In April it also introduced trading in binary options to clients.
CMC Markets’s per client revenue falls despite double-digit growth in active clients in Q3 FY 2017
CMC Markets also reported that the number of its active clients continued to grow, posting a 13% annual increase to 41,234 in October-December, or Q3 of the current fiscal year. However, the overall revenue per client went down by 13% on the year for the reporting period.
Trading activity was somewhat improved in Q3 FY 2017, compared to a year earlier, the broker noted without providing figures.
“As the Group enters the final quarter of the financial year, it is not possible to determine whether the recent uplift in client activity that we have seen will be sustained. However, operating costs continue to be well controlled and inline with guidance,” the broker said in a statement.
CMC Markets holds a license from the UK’s Financial Conduct Authority (FCA). The brokerage got listed on the London Stock Exchange (LSE) in February 2016, raising about £218 million. It serves retail and institutional clients and has offices in 14 countries with a focus on the markets in the UK, Australia, Germany and Singapore.