Plus500 Hits Record on Crypto Trades as Barclays Mulls Entry

(Bloomberg) -- Plus500 Ltd., the brokerage for complex derivatives sold to retail investors, soared to the highest on record as demand for cryptocurrencies swelled, while British lender Barclays Plc signaled it may begin to trade in similar products.

Shares in Plus500 surged to the highest level since the Haifa, Israel-based firm first sold shares to the public in 2013, as revenue more than tripled amid “high levels of interest” in products tied to cryptocurrencies, according to a statement. Barclays is looking at “how to engage” in the market for digital currencies, Chief Executive Officer Jes Staley told investors later Tuesday at the lender’s annual general meeting.

CEOs of the world’s biggest finance firms have struggled to decide whether the $417 billion market for unregulated virtual currencies is a profitable opportunity or a threat to the global financial system. While Staley signaled that his firm, home to one of Europe’s biggest investment banks, may handle some cryptocurrency trades for clients, he also flagged his caution.

“It’s a real challenge for us,” Staley said. On one hand, the market is “innovative and we want to stay in the forefront of technological improvement in finance. On the other side, crypto can be used for activities that we want no part of.”

Barclays will consider some “futures market requests” linked to cryptocurrencies, Staley said. The bank, based in London, is not planning to set up a trading desk for the products, he said.

Staley’s caution is mirrored on Wall Street. Bank of America Corp. CEO Brian Moynihan last month rang alarm bells about the nascent cryptocurrency market, calling for regulation of certain trading and warning about the potential to abet criminal behavior.

At Plus500, which deals in derivatives known as contracts for difference, or CFDs, first quarter sales jumped to $297.3 million in the same period from $77.5 million a year ago amid cryptocurrency interest and volatile markets. The firm also reported a 228 percent increase in new customers in the quarter.

Its shares surged 15 percent earlier Tuesday and was up 5.6 percent at 1:4.2 p.m. in London trading.

“We have since seen market conditions return to more normal levels in the last two months,” Plus500 said. “As such we do not expect such an exceptional performance to be repeated in the remainder of the year.”

CFDs allow investors to bet on the price of stocks, currencies, commodities and cryptocurrencies without the need to own them. The products have become much more popular even though they expose retail investors to large losses. The European Securities and Markets Authority has moved to limit the leverage that traders can take and imposed a ban on the sale of binary options to retail investors.

“We have yet to see the impact of ESMA’s proposed changes and our performance could be further impacted by the rate at which customers opt to be reclassified as professional investors,” Plus500 said.

--With assistance from Laura J. Keller

To contact the reporters on this story: Will Hadfield in London at whadfield@bloomberg.net, Donal Griffin in London at dgriffin10@bloomberg.net, Stephen Morris in London at smorris39@bloomberg.net.

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Darshini Shah

©2018 Bloomberg L.P.