There Is Such a Thing as Too Much Volatility, Online Broker Says

(Bloomberg) -- British online broker CMC Markets Plc’s revenue surged as coronavirus-driven volatility spurred a jump in trading volumes, but the firm’s boss says he’s hoping for a return to more normal times.

“We do not like extreme volatility,” founder and CEO Peter Cruddas said in an interview. “You might think that it’s good for our business, and it is, we do make good money during these extremely volatile periods, but overall we prefer normal volatility.” More stable markets allow the company to better manage its risk and predict future earnings, he explained.

CMC said Thursday that first-half net trading revenue in contracts for difference (CFD) jumped 135% from a year earlier, to about 200 million pounds ($259 million). CFD trading, where clients bet on the price of underlying securities without owning them, has ridden the same wave of Covid-19-driven volatility that’s boosted everyone from institutional brokers to retail investing platforms such as Robinhood.

The excitement has helped send CMC’s stock price 144% higher this year, ranking it among the U.K.’s best performers of 2020. It’s also left the group with a swelling capital position, though Cruddas says the company is not under pressure from investors to increase payouts, for example through special dividends.

“We all like a dividend -- Mrs Cruddas loves a dividend,” the majority shareholder said, “but people can see that we are investing, and they’re quite supportive that we use our surplus cash to keep investing in our technology.”

CMC’s shares slipped 1.2% as of 1:11 p.m. in London after the company flagged an expected increase in operating costs. Cruddas said that mainly reflects investments in technology and recruiting more people, having added at least 50 members of IT staff in the past nine months.

©2020 Bloomberg L.P.