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CMC Markets

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CMC Markets
Company typePublic Limited Company
LSE: CMCX
IndustryFinancial services, Forex trading, CFDs, Spread betting, share dealing
Founded1989 (1989)
FounderPeter Cruddas
Headquarters
London
,
United Kingdom
Area served
Worldwide
Key people
James Richards (Non-Executive Chairman)
Peter Cruddas (Chief Executive)
ServicesOnline trading, CFDs and spread betting
RevenueDecrease £311.2 million (2023)[1]
Decrease £54.5 million (2023)[1]
Decrease £41.4 million (2023)[1]
OwnerPeter Cruddas (60.3%)
Subsidiaries
Websitewww.cmcmarkets.com

CMC Markets is a UK-based financial services company that offers online trading in shares, spread betting, contracts for difference (CFDs) and foreign exchange across world markets. CMC is headquartered in London, with hubs in Sydney and Singapore. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.

History

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1989–2000: Early years

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CMC Markets was founded in 1989 by Peter Cruddas, then 35 years old, as a Foreign Exchange market maker under the name Currency Management Corporation. The name was later abbreviated to CMC and officially rebranded as CMC Markets in 2005.[2][3] According to The Financial Times, Cruddas started the company with just £10,000 in initial capital.[4]

In 1992, the company obtained regulatory authorization in the UK from the AFBD, which was later renamed the Financial Services Authority (FSA).[5]

In 1996, CMC Markets launched a real-time FX trading platform, claiming to have conducted the first-ever online FX trade. The company positioned itself as a pioneer in internet-based trading with its proprietary MarketMaker software.[6][7][8][9]

Between 1996 and 2000, the company's subsidiary, Information Internet Limited, licensed the MarketMaker software to several banks. However, in 2000, Cruddas consolidated ownership of the subsidiary and integrated it into CMC Markets as its internal IT division, ensuring exclusive use of its technology.[10]

In 2000, CMC Markets introduced contracts for difference (CFDs) and, by 2001, launched online spread betting on financial markets. These additions significantly changed the company's business model, establishing derivative products as its primary focus.[11][12][7] In the same year, Peter Cruddas announced his retirement.[13]

2000–2007: Global expansion

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In 2002, CMC Markets began its global expansion, opening offices in multiple countries and growing its spread betting operations in the UK alongside its international CFD business. The first overseas office was opened in Sydney, Australia, led by Goran Drapac and David Trew.[14][15] The first North American office was opened in 2003 in New York, headed by Josh Levy.[16] This was followed in 2005 by the acquisition of the Canadian broker Shorcan Index, which was integrated as the company's Toronto office under the leadership of Simon Grayson.[17][18]

From 2001 to 2005, CMC Markets also operated under the brand name deal4free.com to promote its zero-commission trading services, primarily targeting UK-based spread betting clients. However, commissions were later reinstated, and the brand was retired as part of a company-wide rebranding in September 2005.[19]

In 2006, CMC Markets planned to go public through an initial public offering (IPO), but the effort was abandoned at the last minute, with the company citing unfavorable market conditions.[20][21]

In 2007, the company purchased Digital Look, a financial media and technology company that operated the financial information site Digitallook.com and provided data to third parties. The acquisition was integrated into CMC's London operations, although Digital Look continued offering services to external clients.[22] That same year, CMC acquired the Australian stockbroker Andrew West. The acquisition was merged into its Australian operations under the new name CMC Markets StockBroking, which continued to provide physical share broking services in Australia.[23]

Later in 2007, Goldman Sachs acquired a 10% stake in CMC Markets for £140 million, valuing the company at £1.4 billion.[24]

2008–2013: Сrisis after the Great Recession

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During the Great Recession of 2008–2009, CMC Markets experienced a significant decline in profits. In response, Peter Cruddas changed his management team and closed seven offices and reduced the company headcount from a high of 1,100 employees.[25]

In 2010, the company introduced its Next Generation trading platform to the UK market. This new software offered enhancements over the previous MarketMaker platform, including the ability to quote market prices to additional decimal points and execute trades without re-quotes.[26]

By 2011, CMC Markets had reduced its operations to 17 offices across four continents and a workforce of over 700 employees.[7] That same year, the company sold its Digital Look business unit to the Spanish-based Web Financial Group.[27]

In 2012, CMC Markets reported a 21% drop in revenue and a pre-tax loss of £19.4 million. Following this financial downturn, Peter Cruddas dismissed then-CEO Doug Richards and reassumed the role of chief executive. As part of ongoing cost-cutting measures, the company further reduced its workforce by one-third.[4][28]

2014–2020: IPO and market challenges

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After returning to profitability in 2014, speculation began about a potential IPO for CMC Markets.[29][30]

In July 2015, CMC Markets started to offer binary options, including a proprietary product branded as Countdown, designed for short-term trading.[31]

On 5 February 2016, CMC Markets was listed on the main market of the London Stock Exchange at an initial price of 240p per share, valuing the company at £691 million.[32] This was significantly below the £1 billion valuation that Peter Cruddas had reportedly anticipated when considering an IPO back in 2014.[30] By this time, CMC had over 44,000 active clients and had processed more than 34 million trades.[33] Later that year, on 25 April, the company launched a range of binary trading products tailored for mobile, tablet, and desktop platforms.[34]

Shortly after its stock market debut, CMC Markets saw its valuation drop by half as a result of new regulatory measures introduced by the Financial Conduct Authority (FCA) targeting the spread betting market. Amid this downturn, the company reportedly considered relocating its headquarters and over 300 jobs to Germany, where it was already the largest provider of CFD products. Peter Cruddas was rumoured to have engaged in discussions with BaFin, Germany's financial regulator, regarding this potential move.[35][36]

On 2 June 2016, CMC Markets was included in the FTSE 250 Index.[37] On 15 November 2016, CMC Markets was awarded "Best CFD Broker" at the Finance Magnates London Summit.[38]

In February 2017, the Norwegian Central Bank, Norges Bank, acquired a 3% stake in the company.[39]

Financial difficulties became evident in 2018, when CMC Markets reported a 76% drop in annual profits.[40] In April 2019, CFO and COO Grant Foley announced his departure amid continued struggles, as the company's shares hit a record low following further profit warnings.[41]

In 2019, CMC Markets opened an office in the UAE and announced plans to strengthen its presence in the Middle East.[42]

2021–present

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In 2022, CMC Markets became the official sponsor of the St Kilda Football Club for a three-season partnership.[43] In September, the company launched CMC Invest, an investment app offering share dealing in UK and US stocks, ETFs, and investment trusts.[44] Earlier that year, CMC obtained an in-principle license to operate in Singapore.[42]

In 2023, the company integrated Skale's tools such as a customizable back office, CRM, a multi-layered IB portal, and a traders' area, into its trading platform.[45] A partnership with TrueLayer introduced a closed-loop payments product for secure and swift transactions.[46][47] On 9 June 2023, CMC acquired a 33% stake in StrikeX, a UK-based blockchain technology firm.[48] This partnership facilitated the development of TradeStrike, a centralized exchange for tokenized assets.[49]

However, these initiatives coincided with a challenging financial period. In 2023, CMC Markets' annual report revealed a 43% drop in net profits, a 20% decline in operating revenue, and a 9% reduction in active traders.[50][51] The fiscal year's first half ended with a pre-tax loss of £2 million.[52] In August, its shares dropped nearly 20% following an announcement of weaker annual profits.[53] To mitigate the downturn, CMC initiated a cost-cutting program, resulting in over 220 layoffs globally (approximately 18% of the workforce).[51] In November, the Australian Securities and Investments Commission (ASIC) ordered CMC, along with six other traders, to compensate retail clients for breaches of financial services laws, including offering CFDs with leverage exceeding regulatory limits.[54]

In 2024, CMC Markets reported modest improvements: average revenue per client rose to £4,685, but total segregated client money declined by £31.8 million, reflecting continued financial pressures.[51][55] These improvements were partially attributed to the cost-cutting measures implemented the previous year.[56][57]

Operations

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CMC Markets and several subdivisions offer trading on forex, indices, commodities, shares and treasuries, as well as cash equities products for institutional clients.[42][58] By 2023, the company had more than 300,000 clients worldwide.[46] As of 2024, 56% of CMC Markets' net revenue comes outside of the UK and Europe, mostly from Singapore and Dubai.[51]

Controversy and lawsuits

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Cash-for-Access scandal

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n 2013, CMC Markets became embroiled in the 'UK Cash-for-Access scandal,' which significantly damaged the company's reputation. Media reports, including from The Telegraph, revealed that the company's founder, Peter Cruddas, then co-treasurer of the Conservative Party, offered private dinners with Prime Minister David Cameron and Chancellor George Osborne in exchange for £250,000 donations. Undercover recordings by The Sunday Times captured Cruddas discussing how such contributions could grant donors access to Downing Street dinners, enabling them to lobby their interests directly with the Prime Minister.[59] The scandal prompted Cruddas to resign from his position.[60][4]

The fallout was severe for CMC Markets: approximately one-third of its staff departed, revenue plummeted by 21%, and pre-tax losses reached £2.8 million.[28][61] Although Cruddas later won a libel case against The Sunday Times,[62] in 2015 an appeal court reduced the damages, ruling that the publication's core claims about "cash for access" were substantially supported by evidence.[63][64]

In December 2020, Peter Cruddas was given a peerage, a controversial move by Boris Johnson who ignored the Lords Appointments Commission recommendations not to ennoble Cruddas in regards to his 2012 cash-for-access scandal and the related dismissal as Tory party Treasurer.[65]

Australia class action

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CMC Markets Asia Pacific Pty Ltd faced a class-action lawsuit brought by two former clients, alleging that the company promoted highly risky and unsuitable CFD trading between November 2011 and April 2021.[66] The case, filed in the Federal Court of Australia by Johnson Winter Slattery and funded by Harbour Fund V, L.P., accused CMC of failing to adequately disclose the significant risks associated with CFDs and binaries. The claimants also alleged that the company's systems encouraged retail investors to engage in excessively risky trading.[67]

As of November 2022, the case was in pre-hearing stages.[68] In May 2023, CMC Markets secured a favorable ruling during the discovery process, but the broader lawsuit remains unresolved.[69]

CMC Spreadbet Plc vs Robert Tchenguiz

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In July 2022, CMC Spreadbet Plc initiated legal proceedings against businessman Robert Tchenguiz, seeking repayment of a £1.31 million debt related to spread betting. In response, Tchenguiz filed a counterclaim, accusing CMC of breaching its contract by prematurely closing his account. However, the court ultimately ruled in favor of CMC Markets, resolving the dispute in July 2022.[70] The case was ruled in favor of CMC in July 2022.[71]

2024 lawsuit by Juan Vargas

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In 2024, former senior employee Juan Vargas filed a lawsuit against CMC Markets, alleging that the company's new bonus scheme deprived him of nearly $1 million in bonuses over a 2.5-year period. Vargas further claimed that Matthew Lewis, head of CMC Asia Pacific, threatened him with physical harm when confronted about the bonus changes. The lawsuit brought significant media attention to alleged issues within the company's corporate culture, though no resolution has yet been reported.[66]

References

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  1. ^ a b c "Results for the year ended 31 March 2023" (PDF). CMC Markets. Retrieved 18 February 2024.
  2. ^ "Branding: No such thing as a free deal". 1 November 2005. Retrieved 26 August 2017.
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  4. ^ a b c Kortekaas, Vanessa (2013-01-17). "Cruddas takes the helm at CMC Markets". Financial Times. Retrieved 2024-11-26.
  5. ^ "CMC Markets UK plc". Financial Conduct Authority. Retrieved 2017-08-26.
  6. ^ Davey, Catherine (2011). Making Money From CFD Trading: How I Turned $13K Into $30K in 3 Months. John Wiley & Sons. ISBN 9781118303917.
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  9. ^ Ipsen, Erik (1996-10-07). "CYBERSCAPE : Click on Money?Currency Trades Come to the Net". The NY Times. Retrieved 2024-11-27.
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  30. ^ a b "Peter Cruddas flags up £1bn float after CMC storms into profit". 2014-09-05.
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  33. ^ Quinn, James (2016-01-31). "'This is about the business, I promise you,' says CMC chief ahead of £736m float". The Telegraph. Retrieved 2024-11-28.
  34. ^ "The new era for binary trading has arrived as CMC Markets launches new product". CMC Markets group site. Archived from the original on 2016-04-25. Retrieved 2016-04-25.
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  43. ^ "CMC Markets invests in the future of the Saints". saints.com.au. 2022-11-21.
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  46. ^ a b Chmiel, Damian (2023-08-02). "CMC Markets Leverages Open Banking: Integrates TrueLayer for Faster Transactions". Finance Magnates. Retrieved 2024-11-27.
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  60. ^ "Scandal Rocks CMC Markets". Daily Forex. 2013-09-12. Retrieved 2024-11-26.
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  65. ^ Armitage, Jim (2020-12-23). "Peter Cruddas peerage may be controversial, but his CMC Markets is the second biggest share price riser of 2020". The Standard. Retrieved 2024-11-28.
  66. ^ a b Hornery, Andrew (2014-08-11). "Bullying claims, death threat at centre of elite Sydney stockbroker's lawsuit". The Sydney Morning Herald. Retrieved 2024-11-28.
  67. ^ "CMC Markets Class Action". Harbour. Retrieved 2024-11-28.
  68. ^ "EDIN ZULIC & ANOR v CMC MARKETS ASIA PACIFIC PTY LTD ACN 100 058 213". Federal Court of Australia, New South Wales Registry. Retrieved 2024-11-26.
  69. ^ Matthews, Sam (2023-05-24). "Online traders win discovery in class action over risky CFDs". Lawyerly. Retrieved 2024-11-28.
  70. ^ Fletcher, Olivia (2022-07-01). "Tchenguiz Ordered to Pay £1.3 Million in Spread-Betting Suit". Bloomberg. Retrieved 2024-11-28.
  71. ^ Jafar, Bilal (2022-07-02). "Robert Tchenguiz Loses Legal Battle against CMC". Finance Magnates. Retrieved 2024-11-28.
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