Shortly after yesterday’s IG Group (LON:IGG) reaction, retail FX and CFD broker Plus500 Ltd (LON:PLUS) has also released an update following the announcements from ESMA and the FCA in which they outlined the regulatory changes ESMA proposes to implement in the coming weeks. The principal changes are:
- leverage limits on the opening of a position by a retail client;
- a margin close out rule on a per account basis;
- negative balance protection on a per account basis;
- a restriction on the incentives offered to trade CFD’s; and
- a standardised risk warning.
Plus500 acknowledges ESMA’s announcement noting it already operates in compliance with most of these regulatory changes, including:
- Plus500 has always offered negative balance protection to all customers across all its product offerings in all its markets;
- the Company has always offered maintenance margin levels which enable its customers to have additional protection;
- prominent risk disclosures are provided through all its marketing campaigns and on the Company website;
- the Company stopped offering bonuses in most markets over the course of last year; and
- the Company has never offered binary options.
As previously stated, Plus500 has welcomed and is already aligned with many of the changes proposed by regulators, which the Board believes will enhance the CFD trading landscape. Given the very strong start to 2018 trading, the Board believes there will be a limited impact on 2018’s expected financial performance. The Board will assess the potential impact on future years, but believes that Plus500’s highly flexible business model and global diversification with seven licenses in different jurisdictions, five of which are outside Europe, provide confidence in the Company’s future prospects.
Plus500 is confident that since it is already attracting experienced customers that can be categorised as professionals, this will help mitigate the impact of these changes.
Plus500’s trading platform has been developed in-house based on proprietary technology that does not rely on third party software suppliers and is supported solely by its internal technical expertise. This structure enables it to expedite implementation of regulatory changes efficiently and react quickly to dynamic market developments, representing a significant competitive advantage. The Group also has a relatively low cost base which enables it to flex efficiently to market conditions.
Asaf Elimelech, Plus500
Asaf Elimelech, CEO, commented:
The new regulations are broadly as expected and can be implemented rapidly by Plus500 due to our industry leading in-house technology. We are already compliant in most of the areas targeted, will adapt our business model where changes are required and will continue to mitigate the impact due to our geographical diversification outside Europe. We believe the changes will be to the benefit of industry leaders such as Plus500 and to the detriment of the long tail of smaller and less compliant industry operators, resulting in a better outcome for CFD customers.
We recently announced record results for 2017 and a very strong start to 2018, and are confident that we can become the market leading CFD provider based on new market opportunities and our excellent current performance.