Plus500 on FCA leverage and bonus directives: will have a material impact…

Continuing our coverage of this morning’s news that UK financial regulator the FCA has issued new directives, banning bonus payments to retail traders and limiting CFD trading leverage to 50x, FCA regulated broker and #2 UK CFD player Plus500 Ltd (LON:PLUS) has issued a brief statement about the new rules.

Plus500 did admit that the new rules will indeed have ‘a material operational and financial impact‘ on its UK business. However the company indicated that its FCA regulated entity only accounts for about 20% of the company’s overall revenues.

Plus500 also has regulated subsidiaries in Cyprus – where Cypriot regulator CySEC also recently invoked similar rules and limitations – and in Australia, New Zealand and Israel, where Plus500 recently became just one of six brokers to receive a Forex Dealer license from Israeli regulator ISA.

After the FCA directives were announced, shares of Plus500 as well as other leading FCA regulated online brokers IG Group Holdings plc (LON:IGG) and CMC Markets Plc (LON:CMCX) were hit hard, trading down 30% or more. Also hit, although not as hard, were shares of online gaming giant, Playtech PLC (LON:PTEC), down about 6%. Playtech owns CySEC regulated Retail Forex and CFDs broker, and recently acquired FCA regulated institutional FX group CFH.

The Plus500 press release on the matter reads as follows:

06 December 2016

Plus500 Ltd.

(“Plus500” or “the Company”)

FCA Update

Plus500, a leading online service provider for retail customers to trade CFDs internationally, notes the movement in its share price following the publication on 6 December 2016 by the Financial Conduct Authority (“FCA”) of a note regarding enhancing the conduct of business regime. Industry participants have been requested to provide comments to the FCA’s proposals by 7 March 2017.

The Company believes that the topics covered in the note will have a material operational and financial impact on the UK regulated subsidiary which represents approximately 20% of the Groups revenues.

A further announcement will be made in due course in conjunction with a year end trading update.

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