CMC Markets confident on outlook even as it braces for Australia clampdown

(Reuters) - British online trading firm CMC Markets Plc CMCX.L said on Thursday it expects its full-year results will top analysts' forecasts as it bounces back after being hit by regulatory changes in the industry.

FILE PHOTO: A financial trader works at his desk at CMC Markets in the City of London, Britain, April 11, 2019. REUTERS/Peter Nicholls/File Photo

Shares in CMC briefly jumped more than 7% after the company said its net operating income and pretax profit for the year ending next March would slightly exceed analysts’ highest estimates. However, it also said that Australia planned to tighten regulations as well later this year and by 1448 GMT its shares were up just 1%.

CMC and rivals Plus500 Ltd PLUSP.L and IG Group IGG.L lost clients after regulators in Europe and Britain tightened online trading rules last year, but their recent trading updates have signaled the situation has stabilized.

Australia is now set to follow, and has proposed a ban on the sale of binary options to retail clients, and restrictions on the sale of Contracts for Differences (CFDs) among other products, CMC said in its results statement.

Plus500 and IG also released separate statements about proposed changes by the Australian Securities and Investments Commission (ASIC) to rules that allow anyone with a bank card to make highly-leveraged bets on financial markets.

CFDs give an investor exposure to price movements in securities without owning the underlying asset.


Plus500, whose clients can trade CFDs in more than 50 countries, said on Thursday that it will assess the possible impact on revenue from Australian customers, which made up for about 15% of the total revenue in the first half of the year.

“The transition period after any new regulations is challenging, but as seen in Europe, client trading patterns rapidly adjust and stabilize - this is what Plus500 would also expect to see in Australia,” it said.

Plus500 shares, however, were down 3.2% in London trade.

CMC Markets said it was prepared to respond quickly and manage any regulatory changes. Its Australian business represented 31% of the group’s net operating income in the year ended March.

Meanwhile, IG, which had flagged the possibility of stricter rules in Australia in July, said on Thursday that it still expects to return to revenue growth in its fiscal year ending in May 2020 and that it can adapt and thrive in a stricter regulatory environment.

IG said the new rules could come into effect in the second half of its financial year and that the ASIC consultation on banning binary options to retail clients was set to close on Oct. 1.

Last month CMC reported a rebound in first-quarter net operating income from a year earlier, boosted by higher revenue per active client as traders adjusted to the regulatory curbs.

Reporting by Noor Zainab Hussain and Muvija M in Bengaluru; Editing by Arun Koyyur and Susan Fenton