The well-known UK regulated broker Plus500 Ltd (LON:PLUS), which is part of Playtech Group, has reported some disappointing preliminary revenue figures for 2019. The data shows a 51% drop in total revenues for last year as compared to 2018. Net profit in 2019 amounted to $151.7 million, which is 60% lower from $379 million reported a year earlier. Earnings per share were $1.35 (FY 2018: $3.33).
Its its regulatory filing announcing preliminary results, Plus500 pointed out the difficulties faced due to ESMA intervention measures and hinted that possible actions by Australian regulators to curb the leverage offered for trading CFDs in Australia may have a future impact on the Group’s revenues, since about 14% of its revenues come from its ASIC (Australian Securities and Investments Commission) regulated entity.
Given Plus500’s innovative approach to retail FX and CFD trading a few years ago and their solid financial results from previous periods, we are of the opinion that ESMA intervention measures are now beginning to show their true impact on brokers’ financial performance, particularly those with UK authorized operations attracting UK and European customers. As such, the industry should be prepared to see similar results from other, comparable brokers as more financial results become publicly available.
Indeed, a further reduction in leverage in Australia and other regulated jurisdictions can have a further impact on broker operations, which are exposed to Australian customers and make the option of setting up an offshore, albeit regulated entity ever more attractive.