Gain Capital statement after shares fall 10%: we’ve excelled at times of regulatory change

Continuing our coverage of this morning’s news that UK financial regulator the FCA has issued new directives for Forex and CFD trading, banning bonus payments to retail traders and limiting CFD trading leverage to 50x

Shares of Gain Capital Holdings Inc (NYSE:GCAP), parent company of the retail Forex.com and GTX institutional FX brokerage brands, have dropped about 10% in trading today on the New York Stock Exchange on fears that the new FCA rules will negatively impact the company’s performance, at least in the UK and Europe. Gain Capital has a major foothold in the UK via its 2015 acquisition of financial spreadbetting firm City Index.

Gain’s share price drop follows even more acute action today in the shares of the leading publicly traded UK-listed online brokers. Each of IG Group Holdings plc (LON:IGG), CMC Markets Plc (LON:CMCX) and Plus500 Ltd (LON:PLUS) were down 22%-30% today.

The company statement (see below) was fairly bullish, with Gain Capital saying things like it is ‘is in favor of measures that enhance consumer protection‘, and that its U.S.-based retail futures business and international institutional trading business, GTX, ‘are unaffected by the FCA’s proposals‘.

Gain also pointed out that the company ‘has excelled at times of regulatory change‘ (we’re not sure what they mean by that, or when that was), and views with confidence its ability to navigate the current proposed changes.

Gain has had some struggles of late, with the company recently reporting Q3 Revenues down 33% QoQ, a $5 million loss, and October retail trading volumes the lowest since 2013.

The Gain Capital statement on the FCA’s moves reads as follows:


GAIN Capital Responds to FCA’s Consultation Paper

BEDMINSTER, N.J., Dec. 6, 2016 /PRNewswire/ — GAIN Capital Holdings, Inc. (NYSE: GCAP) (“GAIN” or “the Company”), notes the FCA’s consultation paper issued today (CP 16/40 – Enhancing conduct of business rules for firms providing contract for difference products to retail clients).

GAIN is in favor of measures that enhance consumer protection in the FX/CFD market.  The Company in particular supports all measures to curb aggressive marketing to inexperienced investors and to ensure all clients fully understand the risks of FX/CFD trading.

The Company operates a broadly diversified business, which includes a retail FX/CFD business spanning eight regulatory jurisdictions, including several which currently set leverage ratios for retail investors at similar levels to those proposed by FCA.  The Company also operates a U.S.-based retail futures business and an international institutional trading business, GTX, which are unaffected by the FCA’s proposals.

Several of the other changes proposed by the FCA are consistent with GAIN Capital’s current practices and should not require significant changes to its operations.  The Company does not offer any binary trading products.

GAIN also notes the FCA has proposed a timeline of March 7, 2017 to consider these new rules and looks forward to working closely with the FCA in the coming months.

Throughout its history the Company has excelled at times of regulatory change and views with confidence its ability to navigate the current proposed changes.

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