August 13, 2018 / 6:56 AM / 4 days ago

UPDATE 2-Regulation takes shine off Plus500's record results, shares sink

* First-half core earnings jump on market volatility

* Regulation to hit revenue in European Economic Area

* Shares fall as much as 13 percent (Adds CEO comments, share movement, details)

By Noor Zainab Hussain

Aug 13 (Reuters) - Plus500 Ltd shares fell as much as 13 percent on Monday after the company warned that its “exceptional performance” in the first-half was unlikely to be repeated as global regulators crack down on online trading platforms.

Plus500’s cautious tone took the shine off a near threefold jump in first-half core earnings as political events resulted in higher than expected market volatility.

The Haifa, Israel-based company had raised its full-year financial performance expectations twice in the last two months, saying it benefited from increased volatility stemming from U.S. import tariffs and high levels of trading in its cryptocurrency offering.

Plus500 shares, which rose 130 percent in 2017, were down 11 percent at 1790 pence at 0845 GMT following the more downbeat comments in the outlook statement.

Plus500 provides an online platform for retail customers to trade contracts for differences (CFDs), which are instruments that facilitate bets on moves in share prices without having to buy the underlying stock.

Global regulators have put pressure on trading platforms to address concerns that high-risk speculative products are being offered to retail investors, leading to deep losses.

The European Securities and Markets Authority (ESMA) has banned “binary” options sales to retail clients and restrict the sales of CFDs. The changes came into effect this month.

“It is unlikely that the exceptional performance of H1 2018 will be repeated and the impact of rule changes will potentially affect less than half of European Economic Area revenues (30 percent of group revenues) in the short term,” the company said in a statement.

Plus500 has started to look at whether its long-time customers could be reclassified as professional investors, and retain the right to trade using higher leverage.

Rival IG lowered its revenue forecast for 2019 and said a regulatory clampdown on spread-betting will make some of its products less attractive.

‘We wanted to take on the more conservative approach of bringing in the revenue level and EBITDA aligned with some effect of ESMA’s changes. If you see (regulatory) events in the Japanese or Singaporean market, you can see it usually has an effect of a couple of quarters,” CEO Asaf Elimelech told Reuters.

Plus500, which is regulated in Britain, Australia, Cyprus, Israel, New Zealand, South Africa and Singapore, said trading in the third quarter had been in line with market expectations and Elimelech guided to strong year-on-year growth in 2018.

Analysts expect core earnings of $415 million in 2018, higher than reported $259 million last year, according to Thomson Reuters I/B/E/S. The company earned $349 million in the six months ended June.

“We would like to believe that 2019 will start with a very strong set of momentum ...” he said.

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Amrutha Gayathri and Keith Weir

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