Retail Brokers’ Shares in 2018: Declines & Buybacks

With the results from the new regulations in Europe becoming more or less clear, the value of retail brokerage companies has been declining steadily. As of December, the only companies which haven’t registered a dramatic decline are those which are buying back their own stock.
Plus500 and GAIN Capital have been maintaining an effective floor for their shares’ value over the past several months. The year has been quite a tumultuous one for shareholders of publicly listed retail brokers.
After the regulatory framework was ignored by the market until about the day when it took effect, the decline in the shares of GAIN Capital, CMC Markets, and Plus500 serves only to prove that markets are always acting in the least expected way.
Regulatory Issues and Market Trends
The regulatory issues plaguing the retail forex and CFDs trading industry have been the main fundamental development since December 2016. Around the time of the first hint by the FCA about the severity of the measures discussed at a pan-European level, shares of all publicly-listed brokers tanked materially.
What happened on the stock market in the aftermath, was largely a result from the failure on behalf of some firms to communicate to their investor base about the impact that the changes will have on the business.
While some companies have done an incredibly good job and have even been warning markets about being too optimistic about their prospects, others have painted a picture which turned out to be rosier than many wished.
Plus500 and GAIN Capital Buybacks
Both Plus500 and GAIN Capital chose to provide a cushion to the blow and committed to buying back stock. The effort has helped to prop up shares of the companies so far. Some old-times investors in Plus500, like Crispin Odey, are once again holding a more in the stock.
After the sale of its GTX business, $50mln worth of liquidity for investors to exit their positions. After the announcement, the company’s stock stabilized between $7 and $8 per share. 
CMC Markets and IG Group Hit New Lows
As the diversification effort for both CMC Markets and IG Group gets on its way, so might the value of the shares of the companies which have been punished lately. The reports from IG that the company lost close to 20% of revenues from the EU and the UK caused another leg lower this week.
Both firms have been impacted heavier than expected. The focus on higher net worth clients and the shifting focus to professional clients has been a universal attempt on part of the industry to mitigate the impact of the new regulations. The impact to attracting new clients, however, has been felt the hardest as new client acquisition costs increased dramatically.