Continuing our coverage of this morning’s news that UK financial regulator the FCA has issued new directives, banning bonus payments to retail traders and limiting CFD trading leverage to 50x, FCA regulated broker CMC Markets Plc (LON:CMCX) has issued a brief statement about the new rules.
While stopping short of saying that the new rules won’t really harm its business, CMC stated that it has ‘consistently focused on higher-value experienced premium clients who understand the markets and products they are trading‘.
CMC also made note of its ‘business model and ongoing strategy… focused on generating revenue from client trading costs and therefore believes in establishing long-term client relationships.
Shares of CMC as well as rivals IG Group Holdings plc (LON:IGG) and Plus500 Ltd (LON:PLUS) were absolutely pummeled this morning, trading down more than 30% after the FCA’s new rules were released.
As of the time of writing (12:10 GMT), CMC shares are now down more than 35% on the day to £1.19, their lowest level since CMC Markets’ IPO in February at £2.40 per share.
The CMC Markets press release on the matter reads as follows:
6 December 2016
CMC MARKETS PLC
Response to FCA Consultation Paper
CMC Markets plc (“CMC”) notes this morning’s announcement by the FCA of a consultation on measures designed to enhance consumer protection in the CFD market. CMC shares a common desire to see a uniform application of the highest standards of conduct across the industry.
In its consultation paper, numbered CP16/40, the FCA has identified the risks to inexperienced retail investors posed by firms with a business model predicated on high churn of clients with a high loss rate. CMC has consistently focused on higher-value experienced premium clients who understand the markets and products they are trading. Furthermore, an integral part of CMC’s “client first” proposition over the last five years is ongoing client education about markets, products and associated risks. CMC’s business model and ongoing strategy is focused on generating revenue from client trading costs and therefore believes in establishing long-term client relationships.
CMC recognises that in its consultation paper the FCA is endeavouring to ensure that any regulation is delivered in a balanced fashion and looks forward to working closely with the FCA over the coming months.