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.
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.”