Although coronavirus is bringing a lot of uncertainty to the financial markets, it is doing one good thing for brokers, with increased trading volumes breaking a drought of low client activity. One firm, in particular, to benefit from this is Plus500.
This Monday, the online trading provider of contracts for differences (CFDs) published a statement via the London Stock Exchange’s news service, stating that it has continued to see a significantly increased level of customer trading activity since its last trading update.
Specifically, the broker said: “Following the Trading Update issued on 28 February 2020, the Company has continued to see a significantly increased level of customer trading activity alongside strong momentum across all financial and operational KPIs.
“Revenue from Customer Income has been very strong due to the heightened levels of market volatility. The Company has also experienced gains from Customer Trading Performance which is expected to be neutral over time.”
Plus500 to exceed revenue forecasts
The company highlights that although it is still early in the year and there is still a lot of uncertainty regarding coronavirus, and whether current market volatility will remain, Plus500 expects that revenue and profitability for the full year will be substantially ahead of its current consensus expectations.
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As Finance Magnates reported, in February, the company posted a trading update that it has experienced a period of heightened market activity. In particular, the CFD trading provider has seen heightened volumes of trading across the global markets, which led to a significant uptick in customer trading activity.
Coronavirus isn’t only good news
However, the current panic in the financial markets isn’t only good news for brokers. Large swings in the price of major currencies can be problematic for brokers and traders alike. Back in June of 2016, following the big Brexit vote, many brokers struggled to meet their customers’ demand as there was a squeeze on liquidity.
Flash crash events can cause financial harm to forex brokers. Historically, these types of situations have led to clients receiving margin calls and having positions closed out at a negative balance.
Furthermore, large changes in major currencies can cause hundreds of millions in losses, as was the case when the Swiss National Bank loosened its grip of the Swiss franc (CHF) back in 2015 and removed its peg against the Euro.