The given level of volatility in any financial market can have varying effects across the financial complex, presenting opportunities for suppliers of some derivative products while restricting trading opportunities elsewhere. The latter scenario is currently playing out for CMC Markets (CMCX), where reduced levels of volatility have resulted in fewer trading opportunities for its clients.
The UK financial spread-betting company suffered a double-digit share price fall after it confirmed its punters had been sitting on their hands rather than taking out new positions or altering existing ones substantially. Spread-betting companies would probably have anticipated a tempestuous market atmosphere in the wake of June's EU referendum, but the seeming resilience of the UK economy and central bank intervention have calmed markets. The success or failure of the UK's Brexit trade agreements could impact volatility, though.
CMC is confident of a pick-up in net operating income in the second half to March, helped by institutional offerings and product development. But the group's experience actually stands in contrast to the recent trading performance of rivals such as Plus500 (PLUS), which actually saw demand for its CFDs (contracts for difference) pick up as a result of uncertainties linked to the referendum, although it might just add up to a question of timing and the fact client churn is high.
