How Does Leverage Work in Forex Parent Gain Capital Annouces 13% Revenue Growth in Q3

The financial result of Q3-2018 for parent GAIN Capital is out and it shows a favourable increase in their revenue. With the rise, the profit has also increased for the third quarter of 2018. Instead of having a major downfall in the volumes of trading and GTX institutional division, it witnessed profit.

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GAIN Capital had made $95.5 million in revenues from the total Q3. It is 13% more than Q2’s which made $84.2 million. The net profit of Q3 turned out to be $10.0 million whereas at the time of Q2, it was $6.5 million.

The financial results of GAIN capital surprisingly turn out to be good despite several reports claiming that the trading volumes have reached a record low in the last summer. So, it came as a surprise since the last reported trading volume had reached $149.6 billion after many years.

GAIN Capital made a recent a recent announcement. It planned on a$50 million share buyback at 5-15% premium that will be applied on the company’s share price. Some of the cash that Gain capital has acquired through selling their FX unit to 360T of Deutsche Boerse will be used for the buyback.

The Chief Executive Officer, Glenn Stevens stated that:

“While overall low market volatility continued to weigh on retail trading volumes during the quarter, our diverse product offering enabled strong revenue growth. Volatility in emerging markets, along with trade tensions, prompted high trading activity in emerging market currencies, as well as certain metals and index products, which helped to generate overall revenue capture of $164 per million for the quarter. In addition, our continued focus on organic, direct account growth and marketing initiatives helped deliver strong operating results in Q3, with new direct accounts up 28% year-over-year. As reiterated through our recently announced $50 million tender offer, we are firmly committed to executing a balanced capital allocation strategy to enhance shareholder value.”

Plus500 News

Plus500 Revenue to Fall 40% Following New ESMA Regulations

ESMA effect has made a very strong impact. Even the industry leaders such as Forex brokers and the CFD brokers  are at the receiving end of this effect. Plus500 Ltd, a FCA regulated CFD broker that runs online had released a Trading Update for Q3. It stated that since the previous quarter, the revenues witnessed a drastic fall of 40%. So, the current number is $100.1 million. As per records, it is just a third of the Q1 revenues. ESMA’s had a strict cap imposed on the amount of leverage that every broker can provide to the trading customers. Initially, it had 30x for FX pairs on major ones. And Q3 for 2018 took into account the very first two months of the ESMA’s new regulations.

However, one cannot identify the effect of ESMA while checking Plus500’s ARPU and even the average revenue produced per customer. Also, Q3 ARPU was at $1232 the previous year whereas it is $981 now. Further, the cost of gaining a new customer has gone up to a massive $1581 for the company. Infact, in the initial months of the year, the cost was just $677.

Plus500 News

Plan for $10 Million Share Buy-Back

Plus500’s price of the share has diminished by 40% after having a £20 peak during August. The company has come-up with a plan to cope-up with the situation. With the authority given to company’s AGM, the plan is to start a $10 million share buyback programme. And the Liberal Capital Limited will run this non-discretionary programme. But there are a few parameters that must be maintained.

Also, Plus500 offers that 8% of total EEA customers can be elected as professional clients to represent an approximate 38% of total Q3 EEA revenues. It should be noted that EU brokers and Plus500 can offer professional clients a higher level of leverage.  As the company believes, the current restrictions of EEA will only affect less than half of EEA revenues or 30% of the total revenue.

The Chief Executive Officer, Asaf Elimech quoted,

Our results for the third quarter continued to show satisfactory levels of trading activity of our Active Customers in comparison to previous years, despite regulatory changes and low market volatility. We continue to focus on our core markets and acquiring high value customers supported by our innovative technological edge and the prospect of potential new licences outside the EEA. We now expect to be ahead of current market expectations for 2018. Parent Gain Capital Plans Share Repurchase Worth of $50 Million

FX brokerage group Gain Capital Holdings Inc, a renowned company that owns the and City Index forex brands, is planning to acquire $50 million shares from its common stock. Further, the company announces to start a customised Dutch auction and achieve this feat.

Gain Capital has taken the decision all of a sudden. The dropping in the trading volumes due to low market volatility and strict regulations that have been recently placed on the online trading platform in EU by ESMA is to blame for this recent development.

The company has decided to buy back the shares at a price range between $7.24 to $7.94 per share. Also, there will be no hiding of any tax or hidden charges. And the sellers will buy the share in this case. It also had terms and conditions described in the offer letter as well as in the letter of transmittal. Plus, a price range at the time of Dutch auction. And it stands at a 5-15% premium as per the price of the stock in New York Stock market on the last day before the offer commences.

The offer is scheduled to expire at 5:00 pm on November 6 of this year. But the company can extend in case it wished so.

The CEO of Gain Capital said in his recent statement:

"The Offer underlines our ongoing commitment to executing a balanced capital allocation strategy to enhance shareholder value. Given our strong capital position, particularly in light of the $85 million in proceeds generated from the sale of the GTX business. With current market price of common stock, we believe the Offer is a prudent means to return capital to shareholders. Our strong capital position also allows us to make appropriate investments to pursue growth initiatives, consistent with our goal of delivering long-term value".

According to the company, the Dutch auction allows shareholders a chance to auction all or a part of their shares. Now, they can receive a return or the full amount that they have invested in Gain Capital. This will help them to obtain liquidity without misbalancing the share price.

No member of Gain Capital does not recommend nor discourages the shareholders from participating in the auction. Further, the D.F. King & Co will act as the information agent and the Jefferies LLC will act as the deal manager. Trading Volume Hits Multi-Year Low

By continuing a bad trend for quite some months, Gain Capital Holdings Inc which is a FX brokerage group specifies that September 2018 was by far the weakest and slowest when it comes to trading volume.

Both, as well as City Index online retail trading brands, is owned by Gain Capital. As the reports suggest, the company has had $149.6 billion of trading volume in the month of September. It is the first time in five years that the numbers at have gone below $150 billion.

In the beginning, it was going well as they have posted over $200 billion retail trading volumes that took place each month for six months. The numbers were good for the first half of the year and the hopes were pretty high. But it took a bad turn on the month of September. The volumes were suddenly seen dropping thus it was a bitter shock to them.

It is seen that the company dealt around $7.5 billion on an average in the daily trading volume during the month of September. Whereas the numbers produced through daily trading volume were slightly high with $7.6 billion on August 2018.

Glenn Stevens, the CEO of this reputed company went on to explain:

“Generally lackluster trading conditions throughout the third quarter negatively impacted trading volumes in our retail and futures businesses across GAIN’s global footprint.

However, while volumes were down, revenue per million increased to about $162 for the quarter. The increase in RPM was driven primarily by pockets of volatility in emerging market currencies, including the Turkish Lira, as trading in these products typically generates higher revenue capture for us. Events in Turkey, as well as Argentina, during the quarter also had a ripple effect of a few brief periods of increased trading activity in EUR, GBP and Metals. The foregoing did not impact our Futures business, which saw revenue per contract of approximately $5.15 during the third quarter.”

Blackrock Acquired 7.0% Stake in Plus500

CFDs broker Plus500 LTD that is FCA regulated had gone on for the acquisition of a renowned institutional shareholder along with BlackRock Inc. and thus, ended-up obtaining a major interest of 7.02%.

If you take the recent market price of PLUS into consideration, it can be seen that PLUS values at £14.48 whereas the BlackRock stake that is in Plus500 is currently having a worth of £115.8 million.

As a matter of fact, a maximum percentage of the interest was obtained in Plus500 shares whereas the stake’s one-third is still in the possession of BlackRock in Plus500 CFDs.

Being the world’s most trusted and biggest asset manager, BlackRock successfully manages over $6.2 trillion assets with its expertise.

On a side note, Axxion S.A. from Luxembourg, a private label fund manager shocked everyone when he took 5% ownership of the Plus500.

Shares Droped Due to Poorer Second Quarter Results

With a drop of over 25% in the share price of Plus500, it’s seen that there has been a massive growth in the institutional ownership and the company has witnessed the best high till date with more than £20 per share during the early weeks of August.

But soon the drop came with the second quarter results of Plus500 that exhibited strong results but when compared to record-setting Q1, the second quarter results were not as remarkable as Q1 was.

Also, with the introduction of new regulations of ESMA, the leverage that the traders can make use of were put under control. Furthermore, as the two competitors namely IG Group as well as CMC markets have given negative outlook warnings against Plus500’s share and so, it had seen a gradual fall in its price.

The two largest shareholders of Plus500 namely Playtech PLC and the founders of the company sold $400 million of Plus500 shares to other placements following the institutional purchases.

Further, Playtech has completely left the company's stake which it bought in 2015 in an attempt to acquire Plus500. On the other hand, the founders of the company only own 7.7% of the total stake amount.

FX Brokers Promoting Off-Shore Entities with Non-Marketing Emails

It has recently come into notice that a plethora of EU based CFD as well as retail forex brokers have indulged in emailing their clients as well as affiliates or IBs to remind them that they will not be able to formally market the EU accounts to them. However, they have also notified them that the clients can find off-shore forex brokers to open accounts there in their own interest.

The emails are purely non-marketing to inform the clients. This is being done as per the new initiative that has been taken by ESMA to limit the leverage. This initiative has surely been frustrating for the clients since it has reduced the trading volume greatly at the broker level.

Though these emails do not include any direct promotional link for off-shore forex brokers, they obviously include instructions for clients to find the links on their own.

Restriction for Marketing to the EU Clients

As per the new set of rules for EU MiFID, clients can obviously open accounts with offshore FX brokers. But those brokers have been restricted from marketing to the EU clients. In a similar fashion, the brokers licensed in EU can obviously accept the new clients at their non-EU entities. This way, forex brokers can provide the clients higher leverage. However, they are restricted from marketing their off-shore forex brokers or non-EU entities to the EU based clients.

With new restrictive terms being placed on the brokers licensed in the EU, it is very clear that the non-EU brokers have already witnessed a huge boost in the volume as well as new signups over a period of last six weeks.

Especially, the huge increase in activity was seen amongst the ASIC controlled brokers based in Australia in the past few weeks since it is now being seen as one of the most trustworthy and properly regulated jurisdictions similar to that of EU which is still capable of offering higher leverage.

RoboMarkets Adds New Features to Its Trading Platform

RoboMarkets is a trusted investment plus brokerage company that runs on CySEC rules and recently, they have revealed to make latest additions to the features of R Trader Platform. As a side note, RoboMarkets is a of brand of RFG Holding which owns another forex brand – RoboForex. Click to see my RoboForex review.

Here are the new features that have been included:

1. Improvements in strategy builder

Now, one has the liberty to compare indicators that have equal parameters on varied bars. You can opt for this amazing feature from the strategy editor.

2. Depth of Market (DoM)

You can track even the minimum changes that occur in price with Level 2 market depth. Thus, the traders have the advantage of having an improved understanding of the current condition of the existing market. If you are planning on entering or existing the long-term strategies, then this tool proves to be a blessing to you.

3. Trailing Stop

With the new features being added to the R-Trader platform, you will now be able to add a trailing stop or a stop order which will be designed to follow the price. This feature will help you to reduce the chance of losses without tampering with profitability. The feature allows you to place a number of pips to place the stop order. Once mentioned the trailing stop will follow the price and once the price reaches the number of pips specified, the trailing stop will be placed automatically.

4. Time & Sales

It is definitely a useful tool not only for the stock investors but also the cryptocurrency investors as it provides you with details direction, the times transactions have been made on the stock or cryptocurrency, the direction and of course the price. So, you will have a full knowledge of the total number of buyers as well as sellers present in the current market. Plus, you also get a clear view of the prices or how large their trading amounts are.

5. Keyboards will help to manage Watchlists

This feature allows you to include unlimited instruments to your Watchlist so that you can keep a check on multiple assets simultaneously.  Hence, no need of wasting time by checking them individually.

IMF Warns Marshall Islands For State-Backed Cryptocurrency

Petro is a state-backed cryptocurrency that has been introduced by Venezuela. To save the falling economy from further downfall and to help its people, Petro was invented.

But the idea of making a cryptocurrency, an official currency of a country appears to be vague as a maximum number of countries fail to have regulatory power over the number of digital money.

With 1000 small islands that are situated in the Pacific Ocean, the Marshall Islands thought to come up with a state-backed cryptocurrency.

IMF to Warn Versus State-Backed Cryptocurrency

But according to International Monetary Funds, they must reject the idea of releasing its very own cryptocurrency. Back in February, the law that has been adopted clearly said that Sovereign will be their state-backed cryptocurrency.

However, here lies the problem. The ICO is expected to occur at any point of time of this year but the IMF is firm with their suggestions that Marshall Islands must cancel their plans of proceeding with it in future. As the relation between the Island’s commercial bank and one of US’s bank is not good, it may pose as an issue in this process.

The tokens being liquid and not so regulated, it may be used for various illegal purposes apart from numerous other activities. Thus, these issues may distress the US banks from whom the Marshall Islands take services.

Further, as the press claims, the introduction of this state-backed digital currency will cause serious harm to the relationship and will do no good for the future. Located in the Pacific region, the natural disasters are very common in this area. Thus, a second currency can affect the economy greatly.

Plus, IMF thinks that the costs involving the introduction of the Sovereign will be much high when compared to the benefits of its release.

RoboForex Raises Leverage for Cryptocurrency Trading

The Belize based Retail FX brokerage group, Roboforex has recently announced their decision to raise the leverage for trading cryptocurrencies. As per the news available, the clients that are trading cryptocurrencies through the Roboforex platform will be able to carry out their trading operations with leverage as high as 1:50 from the start of September 2018.

The company has been very dedicated to rapidly improving the trading conditions for the clients while increasing the service offerings of the company. So, they are allowing the clients having ECN-Pro, Pro-Standard and Prime account to trade in all cryptocurrencies with a leverage of 1:50.

The change in the leverage offered will have a profound effect on the positions that are opening in the cryptocurrency market as the previous leverage ratios available were between the ranges of 1:1 to 1:10. The clients will be able to avail this new leverage on MetaTrader 4 and MetaTrader 5 as well as R Trader for different cryptocurrencies like Bitcoin, Dash, Ethereum, Ripple, Bitcoin Cash, Litecoin and EOS.

We were able to get a comment from the Chief Marketing Officer of Roboforex, Denis Golomedov. He said:

"Many of our clients trade cryptocurrencies. It’s really important for them to cooperate with the broker, which provides the most comfortable trading conditions and highest security level when they trade these instruments. The increased leverage will allow our clients to implement a wider range of trading strategies and significantly increase their trading volume".

Providing their services across the globe and having an IFSC brokerage license, Roboforex provides the traders with access to their highly advanced trading platforms along with different trading tools.

So, what are your thoughts on it?

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Flexible Lifestyle: The Biggest Motivation for Traders

A Zurich-based firm for investments, Ayondo has recently found out in a recent survey that the thing that motivates the UK residents to invest in equities is a flexible lifestyle. The results that were gathered from the survey were published recently and it was found out that the UK residents mainly invest in equities to achieve an alternative source of income thereby providing their work life with enhanced flexibility.

It was also found out that most of the men i.e. approximately 35% of the men invest their money in the excitement that they get from it. Whereas, it is only 18% of the women are driven by the excitement factor to invest. Actually, it was found out that women have logical reasons for investing their money.

Whether it is to have an extra source of income or to earn money without putting any actual effort, these are the main reasons that attract most women for investing their money. On the other hand, only 19% of the men that were surveyed had shown interest in questioning their investment efforts for rational reasons.

The British Investors were questioned during the survey about what they consider as the most crucial reason behind becoming a successful investor. While 30% of the investors attributed the success to having a cool head, 28% of the people argued that it is good timing that brings success and only 13 percent of people said that it is a commitment that makes an investor successful.

After getting the results, the Chief Business Development Officer at Ayondo, Mita Natrajan said;

"We are seeing an increasing number of people look for ways in which they can supplement their income to allow for more flexible working hours and a greater amount of leisure time. One way of making this transition easier is through Social Trading. This allows retail investors to follow Top Traders’ investment moves or signal providers to earn additional income in publishing their trading strategies.”

Conducted in February 2018, the survey was made on 500 adults from the UK who have either invested or traded in the share market. The research house, OnePoll executed the survey to understand the habits of UK investors.

I should say that the motivation is not very different for forex traders. Financial freedom and flexible lifestyle are two major reasons that attract investors to online forex trading.