ActivTrades Reports 42% Drop in Trading Volume Post-ESMA

The broker’s turnover and profit also took a hit in 2018.

ActivTrades PLC, a financial markets broker specializing in offering to trade of contracts for difference (CFD) and foreign exchange (forex), has published its financial results for the year ended December 31, 2018.

Like many brokers operating in the retail trading space, the second half of 2018 was difficult following the product intervention measures implemented by the European Securities and Markets Authority (ESMA).

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This resulted in tougher market conditions, lower volatility, and trader activity. This, on top of Brexit uncertainty, made the end of 2018 a hard market to navigate, and this is reflected in the broker’s report filed through UK’s Companies House. Nonetheless, the company still managed to turn a healthy profit and turnover for the year.

Trading volume, however, was hit. Although the group did already have negative balance protection and margin close-out, it states that the leverage restrictions reduced overall trading volumes by 42 percent when comparing volumes before the regulations were implemented.

Turnover Falls in 2018 But Still Remains Solid

Turnover for the Group, which includes the performance of the subsidiaries of ActivTrades PLC, came in at £38.71 million. When measuring this against the previous year, which had a turnover of £40.6 million, this is lower by 4.6 percent. Nonetheless, it is quite a solid performance, considering the situation.

According to the statement, the drop in turnover can be correlated against the 11 percent fall in trading volumes when compared to 2017. As mentioned above, trading volumes suffered as a result of the leverage restrictions introduced by ESMA.

Speaking to Finance Magnaes, Juan Scarabino, the finance director at ActivTrades said: “2018 was another excellent year for ActivTrades, which realised a profit before tax of £12.3m. The Company has continued to improve the service offered to clients, and to expand its operations, with investments in staff, marketing, and IT contributing to 8% growth in administrative expenses compared with the previous year.”

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“For the first time, the group’s accounts include the contribution of ActivTrades Corp, the successful new Bahamas subsidiary which was contributing 27% of monthly trading volume by the end of 2018. The leverage restrictions introduced by ESMA in August were largely responsible for the 11% year on year reduction in trading volumes, and in revenue of 5% to £38.7m. Lower volatility levels and regulatory restrictions in Europe continue to impact trading volumes and revenues in 2019.”

ActivTrades Reports Solid Performance of Bahamas Subsidiary

Following the implementation in August of 2018, the average monthly trading volume fell from $97 billion per month to $56 billion, the report said. By the end of 2018, the company’s subsidiary in the Bahamas, which became operational in June of 2018, contributed to 27 percent of the monthly trading volume.

In fact, the firm’s subsidiary in the Bahamas, ActivTrades Corp, which focuses on customers outside of Europe, performed quite well in 2018. It contributed 1,600 or 21 percent of the new funded accounts, 2,900 or 19 percent of the active customers and £8.2 million or 24 percent of the net deposits during the year.

Although turnover fell in 2018, so did the cost of sales. Specifically, the cost of sales was down by more than half (54.7 percent) from £4.34 million in 2017 to £1.97 million last year.

The direct cost of sales declined for the broker following regulatory restrictions on fees paid to introducing brokers, the report outlined. Nonetheless, the Group’s total administrative expenses still increased by 8 percent year-on-year to reach £24.8 million.

Operating profit for the financial year was £11.98 million in 2018. Again, this is lower on a year-on-year comparison by 10.8 percent. Profit also dropped for the FX and CFD broker in 2018 by 4.6 percent, coming in at £11.04 million. 

Despite the fact that ActivTrades key indicators did fall on a year-on-year comparison, considering the tough market conditions and the financial results reported by other players in the industry, the firm still achieved a healthy profit.

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