CMC Markets warns revenue and profit will be hit by regulatory crackdown

Spread betting and online trading group CMC Markets said today its full year revenue and profit will be hit by a regulatory crackdown on the sector.

CMC said it expects to report contract for difference and spread betting revenue of around £110m for the year to 31 March, 37 per cent lower than the previous year.

It also said it expects net operating income of around £131m, down from £187.1m the previous year.

Shares fell nearly six per cent to 78.9p in early trading.

The company said its performance has been affected by a slowdown in client activity following an intervention by regulator the European Securities and Markets Authority (Esma) which restricted the marketing or sale of contracts for difference to retail customers in October.

Contracts for difference are a financial instrument that allows investors to speculate on price movements without owning the underlying asset.

They can lead to very high losses for traders if the market moves against them.

The company said: “Overall performance in financial year 2019 has been impacted by reduced client trading activity following the implementation of the ESMA intervention measures on 1 August 2018, compounded by challenging market conditions during much of Q4.”

“The group remains focused on tight cost controls, and expects operating costs for financial year 2019 to be marginally lower year-on-year, slightly below previous guidance.”

Looking forward the company said: “The impact of the new ESMA margin rules, which has resulted in retail clients trading less, utilising more of their cash to fund their margin requirements or needing to deposit more funds with CMC to trade at previous levels, is showing signs of stabilising. Since the introduction of the new rules, client money has remained strong, and active client and new client numbers have remained stable resulting in the Group having confidence in meeting the consensus financial year 2020 outlook. We believe that the new ESMA regulations are good for this business and for the industry over the medium to long term.”

Separately CMC's chief operating and financial officer Grant Foley has resigned to "pursue other opportunities" the company said. He will remain with CMC for the next six months during which time the company will recruit for his replacement.

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