18 December 2017
CMC Markets Plc
Response to ESMA Proposals
CMC Markets Plc ("CMC") notes the announcement by the European Securities and Markets Authority (ESMA) issued on Friday 15 December, further to announcements made by the Financial Conduct Authority and other European regulators in December 2016 and June 2017.
This announcement includes proposals to improve investor protection for retail clients, and ESMA will conduct a brief consultation in January 2018 on the matter.
The proposals include the following:-
1. Prohibit the marketing, distribution or sale to retail clients of binary options; and
2. Restrict the marketing, distribution or sale to retail clients of CFDs, including rolling spot forex.
Restrictions on CFDs under review are:
- leverage limits on the opening of a position between 30:1 and 5:1, whose limit will vary according to the volatility of the underlying asset;
- a margin close-out rule;
- negative balance protection to provide a guaranteed limit on client losses;
- a restriction on benefits incentivising trading; and
- a standardised risk warning.
Through its proprietary technology CMC can quickly respond to regulatory change as illustrated with the introduction of negative balance protection in Germany and a limited risk product in the UK this year. Fair client outcomes have always been a focus, with margin close-out and standardised risk warnings already in place throughout the Group.
Binary products generated £2.1m of revenues from the UK and Europe in H1 18 and therefore any prohibition on the marketing of binary options to retail clients will be immaterial in a group context. Proposed margin changes are likely to have an impact on how clients trade, although at this stage it is not possible to quantify the impact.
The Group has focused on higher value clients and has one of the highest revenue per clients in the industry. This coupled with geographic diversity, growing institutional business and a partnership with ANZ Bank to provide stockbroking services in Australia from September 2018, will help to mitigate any impact from ESMA's proposals.
Whilst these proposed changes may have an impact on the Group, CMC welcomes a consistent approach to regulation, a 'level playing field' and the raising of standards in the industry. The Group's focus on attracting high value and experienced clients and its strong balance sheet, means that CMC is well positioned to take advantage of market opportunities that will arise from these proposals.
Enquiries
Camarco +44 (0) 20 3757 4984
Geoffrey Pelham-Lane
Ed Gascoigne-Pees
Jennifer Renwick
Notes to Editors
CMC Markets plc ("CMC"), whose shares are listed on the London Stock Exchange under the ticker CMCX, was established in 1989 and is now one of the world's leading online financial trading businesses. The company serves retail and institutional clients through regulated offices and branches in 14 countries, with a significant presence in the UK, Australia, Germany and Singapore. CMC Markets offers an award-winning, online and mobile trading platform, enabling clients to trade over 10,000 financial instruments across shares, indices, foreign currencies, commodities and treasuries through contracts for difference ("CFDs"), financial spread bets (in the UK and Ireland only) and, in Australia, access stockbroking services. More information is available at http://www.cmcmarkets.com/group/
