CMC Markets welcomes removal of uncertainty from new Australian financial trading regulations

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CMC Markets PLC (LON:CMCX) said it expects new Australian retail financial trading regulations to have a similar, although smaller, impact to those imposed in Europe two years ago.

The Australian Securities and Investments Commission (ASIC) has confirmed that changes, which are due to be implemented from March 29 next year, will restrict leverage on contracts for difference (CFDs) for retail traders at the same maximum ratios as those implemented by the European Securities and Markets Authority.

This ranges from a 30:1 ratio for CFDs bets on major currency pairs and 20:1 for minor currency pairs, gold and major stock indices, down to 5:1 for equity CFDS and 2:1 for cryptocurrencies.

There will be no impact in CMC’s current financial year, the group said.

In the year to March 31, 2020, Australian CFD net trading revenue represented 23% of CMC’s group net operating income.

The company noted that Australian stockbroking net trading revenue, which made up 13% of group net operating income, will be unaffected by the changes.

ASIC’s new regulations will not apply to ‘wholesale’ clients, for which the regulator has, “rightly” said CMC, applied a high bar for qualification.

“Given the group’s focus on acquiring and retaining high quality, experienced clients, we believe a large proportion of Australian CFD net revenue is generated by clients eligible to qualify as wholesale clients, meaning those clients will not be impacted by the regulatory changes announced by ASIC today,” the FTSE 250-listed group said in a statement.

“In the short term, the group believes the impact on Australian CFD revenue is likely to be similar to that experienced in the ESMA region, but the impact on the overall Australian business will be lower given the significant contribution provided by the stockbroking business.

“We look forward to the last of the regulatory uncertainty being lifted so we can continue to focus on driving the business forward in an industry with more closely harmonised regulations in our core markets. Australia continues to remain an integral part of CMC Markets’ diversified global business and CMC is committed to the continued growth and development of the APAC region,” the company added.

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