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FCA and KNF regulated broker XTB continued the rich vein of form that many CFD brokers experienced over the first quarter of 2018 by reporting a record set of preliminary results.
For the first three months of the year, the broker – which is publicly listed on the Warsaw Stock Exchange – earned revenues of $33m, which marked a 94% rise on the same period in 2017. Net profit came in at $17.3m, another record.
So what’s contributed to this record set of results?
XTB claimed that a key component of the performance was an increase in market volatility, which encourage clients to place more trades. Equally, XTB attributed the increase in revenues down to a better ratio of profitability per lot traded. Interestingly there was a greater proportion of revenue contribution away from Indices such as the DAX and Dow Jones compared to 2017.
For the first three months of the year, Indices contributed to 57% of total revenue compared to 71.2% a year ago, yet Index revenue still grew by 51%, meaning that XTB actually performed even better in other asset types.
For example, compared to Q1 2017, FX revenues jumped by 183% whilst commodities also grew by 300%. So clearly the biggest rate of improvement came in XTB managing to better diversify their revenues across multiple asset classes.
Which territories contributed the most?
XTB earns the majority of its revenues from its core markets such as Poland and Spain, which contribute to just under half of the firm’s total revenue. Performance in Poland contributed to 27% of revenue whilst Spain contributed 18%.
Time will tell how much of an impact ESMA’s product intervention measures will have on the CFD firm’s abilities to report strong revenue numbers. ESMA’s measures, which were announced earlier this year and are set to come into effect within the next three months, effectively cuts the amount of gearing or leverage that’s applied to CFD trades from 200:1 to a maximum of 30:1.
So by effect, traders will either have to stump up more margin to get the same level of market exposure or they will have to take smaller sized positions. Despite heavy challenges from firms such as IG, Plus 500 and XTB, ESMA ploughed ahead with their temporary rule changes which looks set to have the biggest impact on the CFD industry over the last decade.
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Richard started the Good Broker Guide in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.