The fallout from the FCA’s move this morning to ban account opening bonus payments to retail traders, as well as a hard 50x leverage cap on CFD trading, has been quick and swift. And, fairly severe.
Shares of several publicly traded FCA regulated CFD brokers including IG Group Holdings plc (LON:IGG), CMC Markets Plc (LON:CMCX) and Plus500 Ltd (LON:PLUS) were absolutely pummeled this morning following our report on the FCA’s release of ts new directives.
In the first 90 minutes of trading this morning on the London Stock Exchange:
- IG Group shares were down 30%
- CMC Markets stock is off 29%
- Plus500 Ltd shares are down 26%
We will soon see if the moves are over-reactions or not.
Our view is that these moves should not have much effect on the larger, established online brokers such as those listed above. They typically are not the ones enticing new clients with deposit bonuses – that’s mainly the domain of newer, smaller, more aggressive brokers who aren’t working off reputation.
And, clients at larger brokers tend to stay longer, and trade with less leverage. The percentage of overall trades involving leverage of greater than 50x at brokers such as IG, CMC Markets and Plus500 is fairly low.
We will continue to follow this story as it develops.