CMC Markets Q3 trading update: Revenue flat as per client metrics fall


cmc markets offices

London-based online trading firm CMC Markets Plc (LON:CMCX) has issued a Trading Update for its Fiscal 2017 third quarter, which covers the three month period of October 1 – December 31, 2016. CMC has a March 31 fiscal year end.

While CMC did not disclose any specific revenue, volume or earnings figures, it did state that the quarter saw some improvement in client trading activity from the previous quarter, with Revenues for the Q3 period in-line with the same period last year. Active clients continued to grow, increasing by 13% from the same period last year to 41,234, although this was offset by lower revenue per client, which was 13% below the same period last year.

We believe that the update will be somewhat disappointing to investors, who were expecting a large pickup in activity. CMC Markets rival IG Group Holdings plc (LON:IGG) just reported record quarterly revenues, with US election related volatility in currency and equity markets combined with continued Brexit uncertainty driving strong trading volumes and client acquisition metrics. Warsaw-based FCA regulated retail forex broker XTB also just reported robust results for the Oct-Dec 2016 quarter.

CMC Markets had a fairly down first half of the year in terms of both Revenues and Earnings (see graph below), and it looks like things didn’t really improve much in Q3.

As far as the regulatory climate, CMC CEO Peter Cruddas commented that:

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. However, as a well-capitalised and established business with 14 offices globally, a strong institutional offering and a business model that is focused on experienced clients, 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.

The full release issued by CMC Markets reads as follows:


26 January 2017

CMC MARKETS PLC

Q3 Interim Management Statement

CMC Markets plc, (LSE: CMCX, “CMC” or the “Group”), a leading global provider of online retail trading, today issues its interim management statement for the period from 1 October to 31 December 2016.

The third quarter saw some improvement in client trading activity from the previous quarter, with net operating income for the period in-line with the same period last year. Active clients continued to grow, increasing by 13% from the same period last year to 41,234, although this was offset by lower revenue per client, which was 13% below the same period last year.

The Group continues to make good progress on its strategic objectives with strong growth in active clients, extending its product offering with the launch of ‘Knockouts’ in Germany and Austria, further growth in its institutional offering and ongoing improvements made to digital channels.

The FCA announcement of 6 December 2016 and subsequent announcements from the German regulator, BaFin (8 December 2016) and the French regulator, AMF (10 January 2017) regarding the marketing and distribution of leveraged products are expected to impact the business when they are implemented.

At this stage, it is difficult to quantify accurately the scale of impact that the proposed regulatory changes will have on client behaviour, and therefore performance of the business, particularly as the final terms and timings of any changes are not yet finalised.

The Group has always been supportive of a clear and consistent regulatory approach, applicable to all providers, to ensure that client interests are best-served and will continue to work with the AMF, BaFin and the FCA to facilitate this. The Group believes that as one of the longest-established providers in the industry, with a focus on higher-value, experienced clients and client service, that it is well placed to deal with these changes in the competitive landscape.

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 in-line with guidance.

CEO Peter Cruddas commented, “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. However, as a well-capitalised and established business with 14 offices globally, a strong institutional offering and a business model that is focused on experienced clients, 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.

We are engaging fully with our regulatory bodies, and in principle, we are supportive of a clear and consistent regulatory approach that all providers have to follow to ensure client interests are best served.

We will be evolving our product offer to limit clients’ downside risk with the launch of a limited risk account and continue to offer our guaranteed stop loss order.

The focus on developing our Next Generation trading platform including our mobile offering will continue as this is critical to attract and retain higher value and experienced clients.

The sector will clearly continue to be challenging while the structure and timings of the regulatory changes are confirmed. However, we believe our business is well able to adapt and we look forward to continuing our successful development within the new regulatory framework.”

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CMC Markets Q3 trading update: Revenue flat as per client metrics fall

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