CMC Markets Shares Plunge as Firm Downgrades Revenue Forecast

CMC Markets Plc, one of the big players in the retail trading space, has downgraded its outlook for fiscal 2019. The company's revenues from contracts-for-difference (CFD) and spread betting are now expected to drop by 20 percent year-on-year.

The company shared the news in the firm’s pre-close trading update today. After a solid first quarter, the firm saw a decline in key metrics. According to CMC Markets, seasonal low market Volatility Volatility In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad In finance, volatility refers to the amount of change in the rate of a financial instrument, such as commodities, currencies, or stocks, over a given time period. Essentially, volatility describes the nature of an instrument’s fluctuation; a highly volatile security equates to large fluctuations in price, and a low volatile security equates to timid fluctuations in price. Volatility is an important statistical indicator used by financial traders to assist them in developing trading systems. Trad Read this Term in the summer and the new Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term from the European Securities and Markets Authority (ESMA) have impacted the company's bottom line more materially than expected.

The previous forecast was for a year-on-year decline in revenues totaling between 10 and 15 percent. Shares of the company dropped sharply as the LSE opened for trading.

After opening 20 percent lower, the UK broker's stock is now trading about 12 percent lower at 146 pence per share.

As the broker expected, retail client activity has dropped in the United Kingdom and Europe. This follows the implementation of the ESMA's new measures. However, since it’s only been two months, the firm believes it is too early to draw any reliable conclusions.

With the summer slowdown coming to an end, the firm has seen an uptick in client activity levels. However, the weight of ESMA has forced CMC Markets to reevaluate its forecasted results for 2019. Specifically, the firm expects its net operating income for 2019 to be below its previous guidance. However, the firm does not believe the change will be too drastic as it has been tightly controlling its costs.

In addition, the broker has also forecast an increase in its operating costs in 2019. This will partially mitigate revenue for the second quarter of 2019 and also for the full year.

CMC Markets Focus on Professional EU Clients

Now, with the ESMA regulation in effect, CMC Markets is focused on increasing the proportion of revenue generated by British and European professional clients. On a rolling 12-month view, professional clients in the UK and Europe generate 40 percent of revenue.

The broker will release its results for the six months ended September 30, 2018, next month on November 22, 2018.