October 3, 2019 / 6:38 AM / 13 days ago

CMC Markets outlook brightens as firm adjusts to regulatory changes

(Reuters) - CMC Markets (CMCX.L) forecast a jump in annual earnings on Thursday, as the online trading platform adjusted to the stricter regulations in Europe which had battered its performance last year.

FILE PHOTO: A financial trader works at his desk at CMC Markets in the City of London, Britain, April 11, 2019. REUTERS/Peter Nicholls/File Photo

CMC expects net trading revenue from its business that deals with contracts for differences (CFDs) - the financial instrument that was the focus of a regulatory clampdown last year, to rise 22 million pounds ($27.04 million) to 85 million pounds for the six months ended Sept. 30.

Changes made to the internal business model helped the company retain a greater part of client income, said CMC Markets, which was set up as a foreign exchange broker with a 10,000 pound investment in 1989.

The company said it was confident that net operating income for the year will surpass 170 million pounds, well above the 154 million pounds estimated by analysts as per a company-compiled consensus and the 130.8 million pounds reported last year.

Introduction of stricter rules over the sale of some high-risk financial products in Europe and Britain last year partly caused CMC to post its bleakest annual results in a decade earlier this year as client numbers plummeted.

But on Thursday, CMC said active client numbers were only moderately lower in the first half year-on-year.

The company expects its stockbroking business revenue to rise by more than two-fold to 14 million pounds in the first half from 5.5 million pounds.

Recent updates by its peers, Plus500 (PLUSP.L) and IG (IGG.L), also point to a steadying in clients as the companies adapt to the new regulatory environment even as a threat of similar clampdown in Australia looms.

“This time last year we had the uncertainty of regulatory change hanging over the sector and the uncertainty of how clients would react to the changes in minimum margin levels,” said CMC Chief Executive Officer Peter Cruddas.

“A year on, we are seeing clients adapting to the new changes and still maintaining their interest in the products and the trading platforms we offer.”

Reporting by Muvija M in Bengaluru; Editing by Subhranshu Sahu

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