2022 Equity Market Rout Pushed CFDs Investors Out

Thursday, 23/02/2023 | 12:25 GMT by Damian Chmiel
  • Interest in stock CFDs dropped significantly in 2022.
  • Brokers’ profits from this business line have fallen too.
falling man
Source: Ron Finberg

Although 2023 started on a solid foot, the stock market’s collapse in 2022 was impossible not to notice. Substantial discounts on leading indices and a continuously strengthening dollar have reduced retail investor activity on Wall Street and almost every other stock trading floor worldwide.

Have investment firms felt the decline in equities interest? Which instruments may have proved more attractive last year? Finance Magnates delved into the reports of publicly listed trading firms and spoke to industry representatives for answers in the newest Quarterly Industry Report.

Grab your copy of our latest Quarterly Intelligence Report for Q4 2022 before your competitors and stay up-to-date with crucial developments in the Forex and CFD industry!

Equities Decline Bad for CFDs Popularity

After over a decade of almost uninterrupted gains, global stock markets finished 2022 with the steepest declines since the Great Financial Crisis of 2008. The S&P 500 index lost nearly 20%, the Nasdaq 100 technology index gave back as much as 33%, and the MSCI World equity index was down 18%.

Filippo Ucchino, the Founder and CEO at InvestinGoal
Filippo Ucchino, the Founder and CEO at InvestinGoal

As a result, instead of betting on equities, investors looked for a place to hide in the safe-haven dollar, which gained more than 8% to a basket of currencies. At one moment in 2022, it rose by 20%, reaching record highs. Bond yields gained along with the greenback: the US 10-year debt note yield rose 156% and tested levels above 4.3%, which is the highest since 2007.

Filippo Ucchino, the Founder and CEO at InvestinGoal, a trading research platform for retail traders, states that Google Trends shows a visible slump in the popularity of shares trading amongst CFD traders.

“The decline in Big Tech stock prices in 2022 was indeed directly related to a loss of user interest in Equity CFD trading. A keyword analysis on Google Trends shows that interest in stock CFDs has dropped in a very similar way,” Ucchino commented.

“While interest in Big Tech stock price movements remained more or less in line, even experiencing some spikes (for example, as a result of the various layoff news), interest in stock CFD trading dropped about 50%, very similar to the -46% decline by the Big Techs overall,” Ucchino added.

Google Trends
A decline in interest in CFDs in Google Search. Source: Google Trends

Publicly Listed Brokers Show Lower Shares Trading Revenues

Looking at the financial reports of IG Group, CMC Markets and XTB, there is an apparent slowdown in revenue resulting from trading equities. According to the IG Groups’ interim results report for the six months ended 30 November 2022, “Stock trading and investments” accounted for the smallest share of the broker’s revenue, recording a decline of 30% compared to the same period a year earlier. Total revenue in H1 FY23 was £11.3 million, which is down from £15.9 million in 2021. Net trading revenue in stock trading and investment per client also fell 29% to £122.

The CMC Markets report, published in November and covering the six months ended 30 September 2022, reached similar conclusions. The broker showed an overall increase in net operating income of 21% YoY, to £153.5 million, but a 14% fall in investing net revenue over the same period, to £20.8 million from £24.2 million.

Watch the recent FMLS22 panel discussion on: "What CFDs Traders Value Most & How They Choose Their Brokers."

We can look for the most up-to-date information regarding the popularity of shares trading amongst CFD traders in XTB’s 2022 initial financial report, published in early February. The turnover of equity CFDs amounted to PLN 1.1 million in the last quarter of 2022, falling by more than 90% compared to the PLN 11.5 million reported in the same period a year earlier. Thus, it is evident that the trading activity bottomed out with the market itself.

After the Storm, the Sun Comes Out

In 2022, equities were no longer the favorite instruments of retail investors, including in the CFD industry. Commodities or currency pairs became way more popular due to the almost continuously rising dollar.

However, according to experts interviewed by Finance Magnates, the market storm should calm down, and the first rays of sunshine will appear again in 2023.

To get the full article and the bigger picture on equity market valuation and its influence on CFDs trading popularity, get our Latest Quarterly Intelligence Report.

Although 2023 started on a solid foot, the stock market’s collapse in 2022 was impossible not to notice. Substantial discounts on leading indices and a continuously strengthening dollar have reduced retail investor activity on Wall Street and almost every other stock trading floor worldwide.

Have investment firms felt the decline in equities interest? Which instruments may have proved more attractive last year? Finance Magnates delved into the reports of publicly listed trading firms and spoke to industry representatives for answers in the newest Quarterly Industry Report.

Grab your copy of our latest Quarterly Intelligence Report for Q4 2022 before your competitors and stay up-to-date with crucial developments in the Forex and CFD industry!

Equities Decline Bad for CFDs Popularity

After over a decade of almost uninterrupted gains, global stock markets finished 2022 with the steepest declines since the Great Financial Crisis of 2008. The S&P 500 index lost nearly 20%, the Nasdaq 100 technology index gave back as much as 33%, and the MSCI World equity index was down 18%.

Filippo Ucchino, the Founder and CEO at InvestinGoal
Filippo Ucchino, the Founder and CEO at InvestinGoal

As a result, instead of betting on equities, investors looked for a place to hide in the safe-haven dollar, which gained more than 8% to a basket of currencies. At one moment in 2022, it rose by 20%, reaching record highs. Bond yields gained along with the greenback: the US 10-year debt note yield rose 156% and tested levels above 4.3%, which is the highest since 2007.

Filippo Ucchino, the Founder and CEO at InvestinGoal, a trading research platform for retail traders, states that Google Trends shows a visible slump in the popularity of shares trading amongst CFD traders.

“The decline in Big Tech stock prices in 2022 was indeed directly related to a loss of user interest in Equity CFD trading. A keyword analysis on Google Trends shows that interest in stock CFDs has dropped in a very similar way,” Ucchino commented.

“While interest in Big Tech stock price movements remained more or less in line, even experiencing some spikes (for example, as a result of the various layoff news), interest in stock CFD trading dropped about 50%, very similar to the -46% decline by the Big Techs overall,” Ucchino added.

Google Trends
A decline in interest in CFDs in Google Search. Source: Google Trends

Publicly Listed Brokers Show Lower Shares Trading Revenues

Looking at the financial reports of IG Group, CMC Markets and XTB, there is an apparent slowdown in revenue resulting from trading equities. According to the IG Groups’ interim results report for the six months ended 30 November 2022, “Stock trading and investments” accounted for the smallest share of the broker’s revenue, recording a decline of 30% compared to the same period a year earlier. Total revenue in H1 FY23 was £11.3 million, which is down from £15.9 million in 2021. Net trading revenue in stock trading and investment per client also fell 29% to £122.

The CMC Markets report, published in November and covering the six months ended 30 September 2022, reached similar conclusions. The broker showed an overall increase in net operating income of 21% YoY, to £153.5 million, but a 14% fall in investing net revenue over the same period, to £20.8 million from £24.2 million.

Watch the recent FMLS22 panel discussion on: "What CFDs Traders Value Most & How They Choose Their Brokers."

We can look for the most up-to-date information regarding the popularity of shares trading amongst CFD traders in XTB’s 2022 initial financial report, published in early February. The turnover of equity CFDs amounted to PLN 1.1 million in the last quarter of 2022, falling by more than 90% compared to the PLN 11.5 million reported in the same period a year earlier. Thus, it is evident that the trading activity bottomed out with the market itself.

After the Storm, the Sun Comes Out

In 2022, equities were no longer the favorite instruments of retail investors, including in the CFD industry. Commodities or currency pairs became way more popular due to the almost continuously rising dollar.

However, according to experts interviewed by Finance Magnates, the market storm should calm down, and the first rays of sunshine will appear again in 2023.

To get the full article and the bigger picture on equity market valuation and its influence on CFDs trading popularity, get our Latest Quarterly Intelligence Report.

About the Author: Damian Chmiel
Damian Chmiel
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Damian's adventure with financial markets began at the Cracow University of Economics, where he obtained his MA in finance and accounting. Starting from the retail trader perspective, he collaborated with brokerage houses and financial portals in Poland as an independent editor and content manager. His adventure with Finance Magnates began in 2016, where he is working as a business intelligence analyst.

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