Two of the biggest brokers operating in the UK have just issued statements commenting on Friday's FCA’s announcement. Both CMC Markets and IG Group have already factored in the impact of the permanent change in the regulations.
The UK regulator has signaled that it intends to make the temporary restrictions to CFDs distribution to retail traders, permanent. The news comes as no surprise to both firms as they keep shifting their business away from the traditional business model.
Shares of both firms rallied after the market open, as the market welcomed the end of a period of uncertainty. While some industry participants were hoping for a reprieve, the FCA’s announcement also cemented the new regulatory framework as it is.
With the lack of new provisions, and the inclusion of bank products, like turbo certificates, the FCA is welcoming firms to submit their opinions on making the change permanent. That said, the letters sent by brokers to the regulator last year, have been largely dismissed.
CMC Markets Statement
In its announcement via the London Stock Exchange ’s real-time news service, CMC Markets highlights that the measures are already in place. The brokerage states that it is not offering to its clients any turbo certificates and doesn’t expect any change to its revenues outlook.
The discussion about the ban of cryptocurrency CFDs by the FCA has also been dismissed. According to the statement made by CMC Markets, the company doesn’t book significant revenue from cryptocurrency CFDs trading.
Citing data from the first half of fiscal 2019, CMC states: “This asset class was immaterial so any ban will not have a material impact on the Group.”
CMC Markets highlights that over 40 percent of the broker’s revenue is now hinging on elective professional clients. These numbers increase to 50 percent of the broker’s revenue in the institutional segment.
The retail brokerage stated that it generates only 30 percent of its revenue from outside of Europe. The company’s commitment to expand its Australian stockbroking unit with the ANZ partnership is expected to change this metric.
IG Group Signals Measures “As Expected”
The heavyweight retail broker in the UK market, IG Group, signaled that it has been expecting the change. The company stated that it does not foresee any impact form the new measures and its revenue expectations remain unchanged.
IG Group highlights reinforce its commitment to the regulatory framework and reaffirms its support of the objective of regulators, which is to improve client outcomes in the industry.
"In IG's experience, when proportionate Regulation has been applied consistently and appropriately, client outcomes have improved, and compliant providers have benefitted over the longer term,” the broker’s statement elaborates.
