ESMA Effect

CMC Markets announce a profit drop of 88% – what does this mean for the wider market?

The ESMA effect on brokers is starting to become more apparent. With profit warnings having come from some of the forex industries big players recently it is evident that ESMA is having an impact on the brokers but what is the underlying impact it is having on traders? Are we to believe what traders becoming less exposed to volatility or is the low volatility seen over the past 12 months an extenuating circumstance that is making us all come to the wrong conclusions?

With longterm impacts yet to be known, the short-term doesnt look too good for investors in trading firms. CMC markets lost more than 35% revenue YOY, 88% of profits and their CFO as a result. IG and Plus500 have seen their shares drop more than 10% following the announcement from CMC so it seems like the industry is feeling the bite.

Where do the brokers and traders go from here? Stocks, cryptocurrencies, ETFs? It may be we see more of a pullback but we are of the mind that the pace of positivity may quicken towards the back end of 2019.