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Plus500 lost one-third of its market value after announcing that this year's profits would be "significantly lower" than the city's expectations because of stricter European regulation of the highly speculative trading instruments it markets to investors. small investors.
The Israel-based broker, which offers differential contracts that allow individual traders to take high risk bets on the future performance of currencies, stocks and crypto-currencies, has announced a 90% increase in its earnings before tax for the fiscal year up in December at $ 379 million.
But the group warned that such performances could not continue despite European rules limiting the money that amateur traders can borrow from their brokers to try to recover the returns of CFDs. More has been particularly vulnerable to this upheaval because it offers one of the highest multiples of this leverage.
The profit warning resulted in a 33% drop in Plus shares in early London deals, which resulted in a 5.9% drop in the past year. IG group competitors fell by almost 6%.
Last month, Plus got the close shareholder agreement to increase the potential pay of CEO Asaf Elimelech and his chief financial officer, Elad Even-Chen, 48% of investors voting against new formulas of remuneration. Each will receive an annual bonus of $ 1.8 million if the profitability criteria and the obstacles to compliance with the regulations are respected, with additional discretionary bonuses.
The European Securities and Markets Authority temporarily enforces its restrictions on retail CFD transactions in the form of emergency product interventions – new powers made possible by the Mifid II market rules entered in force last year.
After performing its first retail CFD intervention in August, Esma announced in December that it would extend these temporary restrictions for three months starting February 1st.
The United Kingdom's Financial Conduct Authority is also tackling retail CFDs and announced in November that it would introduce stricter and permanent rules.
"Following our latest badessment of the impact of Esma regulatory measures, revenues for 2019 are expected to be lower than current market expectations," said Plus 500.
"This, combined with our intention to maintain our marketing spend, is expected to result in a 2019 profit significantly below market expectations."
The broker said that as the regulations tightened, he was considering diversifying his revenue streams by expanding globally and acquiring new operating licenses.
Plus 500 also stated that it "would benefit in the medium and long term from tighter regulatory oversight, and. generate increasing and increasingly sustainable returns over time. "
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