After a difficult 2023, outlook for online trading platforms brightens as retail investors return
A bleak 2023 for retail trading platforms looks set to give way to a renaissance in 2024 with elections, falling interest rates and geopolitical volatility potentially prompting renewed interest in online trading.
Both CMC Markets and Plus500 released trading updates covering the three months to December on Monday morning, with the pair both revealing results for 2023 will be above market expectations.
Plus500 now expects to perform “significantly ahead” of current market expectations. Although the firm did not give any details, Stuart Duncan at Peel Hunt suspected the strong performance was “down to better-than-expected customer trading activity in the final quarter.”
CMC Markets meanwhile said it had performed strongly thanks to “an improvement in market conditions.”
It raised its 2024 net operating income guidance to between £290m and £310m, having previously guided for somewhere between £250m and £280m.
Shares in Plus500 closed the day 7.5 per cent higher while CMC markets climbed over 25 per cent.
The updates will raise hopes that retail trading platforms will be able to power away from a disappointing 2023.
Online trading platforms recorded exceptionally good years in 2021 and 2022 as people locked at home during Covid with nothing to spend their money on took a punt on an increasingly volatile market.
However, customer activity declined last year as cost of living pressures rose and volatility eased.
As a result, CMC swung to a loss in its half-year results with chief Lord Cruddas lamenting the “subdued market conditions.” Its shares lost around 50 per cent last year.
Despite posting a 44 per cent drop in profit in its half-year results, Plus500 shares fared better as it pushed forward with international expansion plans and offered investors hefty rewards.
Reflecting the downturn, fellow FTSE-listed trading firm IG Group revealed in October that it was slashing 10 per cent of its workforce in a cost-cutting drive.
But markets turned a corner at the end of 2023, fuelled by bets that interest rates would soon start to fall and traders are starting to take notice.
A survey from Hargreaves Lansdown revealed investor confidence bounced in December, helping to boost activity on trading platforms. Emma Wall, head of investment analysts at Hargreaves Lansdown, noted that investors “played the momentum trade” by buying into rallying markets.
The question now is whether the pick-up in activity in the final three months of December is a sign of things to come.
“Looking into 24, there are some glimmers of optimism – things like when do interest rates start to reduce, a fairly significant number of elections in major economies – all these things are potential catalysts to stimulate activity,” Duncan told City A.M.
But he warned that trading platforms are characterised by “an inherent lack of visibility with regards to activity levels.”