Financial markets broker ActivTrades PLC recently published its financial results for the year ending December 31, 2018. The company, which offers forex and contracts for difference (CFD) trading to users was hit hard because of the ESMA and suffered major losses.
Retail trading goes for a toss
Just like its peers, ActivTrades found itself in the middle of a difficult second half of 2018 after the European Securities and Markets Authority (ESMA) introduce new product intervention measures. The market conditions became tougher, and trader activity dropped along with volatility. Uncertainty over Brexit added fuel to the fire, making late 2018 an extremely difficult market to navigate.
According to its recent financial reports, the company had negative balance protection and margin close-out measures in place already. However, leverage related restrictions reduced the overall trading volumes by 42%, when compared with pre-regulation volumes. Because of the lower volume, turnover for the company was significantly impacted as well. The performance of the company and its subsidiaries suffered and the total turnover of the company was £38.71 million. Last year, the turnover was £40.6 million, marking a 4.6% decline for the company.
The financial statement suggests that the turnover drop could be correlated with the 11% fall in trading volume in 2018. This was a direct result of leverage restrictions brought about by the ESMA.
Bahamas subsidiary reports robust performance
After the new measures of the ESMA were implemented in August 2018, the average monthly trading volume fell to $56 billion per month. This was a striking contrast to the $97 billion per month average trading volume recorded before. However, the company received good news from the Bahamas as its local subsidiary, which started operating in June 2018, led to a 27% rise in monthly trading volume.
The Bahamas Company, ActivTrades Corp. catered to customers outside of Europe and registered a good performance in 2018. It represented 21 percent (about 1600) of the new funded accounts and 19% (2900) of the platform’s active customers. It also brought about 24% net deposits during the year amounting to £8.2 million.
The total turnover took a hit in 2018, but the cost of sales also declined. During the year, the cost of sales was £1.97 million, marking a 54.7% fall from the £4.34 million figure of 2017. The decline in cost of sales was attributed to regulations, as there are restrictions on fees charged by introducing brokers. This couldn’t stop the group’s total administrative expenses from rising by 8% to £24.8 million.
They reported an operating profit of £11.98 million, marking a 10.8% decline year-on-year.