Margin Trading and Spread Betting broker CMC Markets recently announced an acquisition. It is buying the share trading business, it has run in conjunction with Australia’s ANZ bank, for several years.
CMC Markets provided online share dealing and investment services to the clients of ANZ, through a white-labelled technology partnership. CMC Markets will now assume ownership of that business and the broker will pay ANZ AUD 25.0 million for the acquisition.
CMC markets will acquire a business with more than 500,000 clients and assets under administration of over AUD 45.0 billion. The existing partnership generated revenues of £39.50 million for CMC markets in FY 2021.
CMCs management believes it will take between 12 to 18 months to fully transition the business and its existing client base.
Will CMC Markets offer investing products?
Yes, CMC Markets intends to offer investment products such as trading in physical shares and funds. The broker indicated earlier this year that it would expand its product range in order to diversify its income streams, and the three years of experience, it has gained operating the partnership with ANZ Bank, should allow it to hit the ground running.
Which other CFD trading platforms offer physical investing as well?
Several other CFD trading platforms already offer physical share trading and investment services and have done so for a number of years. These include IG, Saxo Markets and Fineco.
Whilst investment platforms such as Hargreaves Lansdown offer CFD trading among their services.
Why would CFD brokers offer investment products?
CFD brokers are keen to diversify their income streams, to reduce their reliance on margined product trading, in which revenues can be highly volatile.
Many of these firms have large client bases who may also be investors, as well as traders, and the CFD brokers want to do the investment business for their client base as well.
The market tends to put a premium on revenues, that it sees as being recurring rather than variable when it comes to valuing a business. So it prefers the fees and commissions associated with share trading and investments, to the spreads associated with CFD trading and Spread Betting.
CMC Markets share price was hit hard recently when the company warned on profits, after a downturn in its leveraged client’s trading activity.
Diversifying into investment products may help to smooth out these bumps in the road, and that in turn could make the company’s shares more attractive to institutional investors.
