Your FX Broker Snapshot 2Q2022

Post-pandemic 2022 has been a mixed year for Forex and CFD brokers across the world. The peak of the pandemic saw millions of consumers in lockdown with large stimulus checks sitting around bored and looking for something to do. This prompted many to try their hand at trading and global capital markets saw a massive influx of new traders - especially in the equity and Forex markets. This introduction of fresh new capital to the markets greatly favored brokers across the board. 

However, with the pandemic at an end and the growth spurt slowing, brokers are starting to face a very different reality in the markets. Rising inflation and recession fears have prompted many traders to seek safer alternatives in the fixed-income market, which has not been a net positive for most brokers.

This second ‘Broker Snapshot’ by investfox.com will serve as an overview of listed FX and CFD brokers and compare their performance since the start of 2022 and look at how their performance compares to the previous quarter of the year. 

Revenues, net income figures, and market capitalization will be the broad focus of this snapshot.

We will be looking at brokers from across the world, hence, their reporting periods, native currencies, and accounting standards differ considerably. 

Financial results in our comparison charts will be denoted in US dollars, while data from individual quarterly and annual reports will be denoted in the same currency as the reports. 

Brokers such as StoneX Group (the company behind Forex.com and City Index), XTB, and IG Group have enjoyed a fruitful year so far, while others, such as NAGA Group and CMC have seen some considerable underperformance.

Head-to-head comparison of listed FX brokers

In this section we will compare the half-year results of the listed broker based on key financial metrics such as revenue, net income/loss, market capitalization, etc. 

These metrics can help us identify how they stack up against competitors and how they have performed throughout the turbulent first half of 2022.

Revenue growth is one of the most important indicators of a successful brokerage and comparing the revenue figures of listed FX brokers will provide us with some important insights into the health of the Forex industry in 2022. 

Due to regulatory and currency differences, the head-to-head metrics will be denoted in US dollars.

Market capitalization is one of the key metrics used in measuring the size of public companies. While the figure itself is not indicative of the real book value of an enterprise, it does provide valuable insight into the attitudes and expectations of investors with regards to the current standing and future growth prospects of a company. 

Below we can examine the chart of listed Forex brokers by market cap as of October 13, 2022, compared to their respective market caps at the start of the year. 

From this sample list of brokers, IG Group has the largest market cap, while NAGA Group is by far the smallest player on the list. 

Plus500 (LON:PLUS)*

Plus500 is an Israeli-based multi-asset broker offering CFD and share dealing platforms* (only offered on the Plus500Invest platform; *Plus500 Invest is currently available in certain countries.) to millions of users worldwide. The company is listed on the London Stock Exchange and is a part of the FTSE 250 index. 

• Plus500 offers trading services to over 23 million customers worldwide
• The company was founded in Israel in 2008
• The company offers its services in over 50 countries
• Plus500 offers over 2,800 CFD tradable instruments
• Brokerage services offered by Plus500 include CFD, shares and Plus500Futures (can be traded on the Plus500Futures platform and are offered only by Plus500US and accept only US traders) platforms
• The company offers commission-free trading and tight spreads with leverage up to 1:30 on the Plus500CFD platform

Plus500 has enjoyed a successful first half of 2022. Revenues for the first two quarters have increased over 45% compared to the same period in 2021. 

The company had made some significant acquisitions in the previous fiscal year, acquiring controlling stakes in Cunningham Commodities and EZ Invest Securities - continuing the push for expansion into the Japanese market. 

Plus500 also entered the US futures market through their subsidiary Plus500Futures. The launch of the futures platform was made possible by the prior acquisition of Cunningham Commodities in the US. 

Net income figures also saw a sharp increase according to the quarter that ended in June 2022, with the figure reaching $122 million, representing a 47.8% increase YoY. The diluted EPS figure of 1.22 is also a considerable (+50%) improvement from the previous year. 

The pandemic years saw an influx of new users to Plus500’s platforms and as the wave dies down, the company is pushing for expansion into new markets.

Plus500 is a heavily regulated brokerage, with licenses from top regulators such as the UK’s Financial Conduct Authority (FCA) and the Australian Securities and Investments Commission (ASIC).

2022 has also been a year of new sponsorship deals for Plus500, with the company partnering up with actor Kiefer Sutherland for their new marketing campaign, as well as signing a sponsorship deal with the Chicago Bulls of the NBA. 

*81% of retail CFD accounts lose money.

CMC Markets (LON:CMCX)

Another UK-based Forex and CFDs broker in the spotlight is CMC Markets. The company has had a volatile year so far, with the stock price reaching its peak in July 2022, trading above 300 GBP - followed by a sharp fall toward the 225 region. 

• CMC Markets offers multiple different asset classes for trading, such as Forex, indices, commodities, treasuries, crypto, shares, and ETFs
• CMC is regulated by the Financial Conduct Authority (FCA) in the UK
• The company was founded in 1989 and has been offering CFDs trading for over 30 years

The performance of CMC Markets since the start of 2022 can be partially attributed to the different reporting periods chosen by the company. The full fiscal year results were presented after the first quarter of the year had ended. 

The last quarter saw the company underperform and miss analysts’ expectations by most metrics. The revenues, net income, EPS, and profit margins all missed the comparable 2021 results. The first half of the year still managed to beat expectations though - bringing in a total of $176 million in revenue. 

To counteract the underwhelming results brought about by the post-pandemic decline in user growth, CMC has launched a new trading platform, CMC Invest, which aims to consolidate the various trading solutions offered by the company. 

The management presented forecasts for the upcoming year, with revenue expected to increase by 20% throughout the first half of the year. CMC Markets also cited that the reduction in leveraged clients was caused by an increase in new client activity.

If market conditions remain consistent and management’s forecasts materialize, CMC Markets might be trading at a discount and increased revenue and net income figures could boost the stock price above the 250 mark again. 

XTB (WSE:XTB)

XTB is a Poland-based FX and CFDs broker that has enjoyed a successful first half of the year 2022, with the stock price starting off at 15 PLN and reaching above the 20 PLN mark after the start of the second quarter.

• XTB offers over 2,100 instruments for trading, such as Forex, CFDs, indices, commodities, and crypto
• The company has a user base of just under 500,000 registered traders
• The company was founded in 2002 in Poland and offers its products predominantly to clients across Europe

XTB has enjoyed an explosive first half of 2022. Continuing the positive trend from the first quarter, the company posted some good second quarter results in June of 2022. To highlight the sheer overperformance of XTB, let’s look at an overview of their financial results:

• Revenue increased by over 637% compared to 2021, reaching 396.4 mln PLN
• Net income reached 226.9 mln PLN, a 1044% increase YoY
• Diluted EPS at sits at 1.94, up 1023% compared to 2021
• Net profit margin increased to 57.25%, a 228% increase YoY
• The number of active clients reached roughly 150,000, with over 55,000 being new users

Part of XTB’s explosive growth can be attributed to the user-friendly xStation trading platform and an aggressive expansion strategy. 

The management team is seeking to continue their push and expects to acquire over 40,000 new customers throughout every quarter of 2022. The primary revenue growth drivers for XTB in 2022 were commodity and index CFDs. In terms of geographic distribution, Eastern Europe remains their largest market, but expansion into Western Europe has shown considerable growth for the company. Revenue from Latin America has more than doubled compared to the last quarter of 2021. Conversely, activity on the Middle Eastern market has slowed significantly.

IG Group (LON:IGG)

IG Group is a UK-based FX and CFDs brokerage listed on the London Stock Exchange. The YTD performance of IG has been mixed at best, while QoQ changes have been noticeable, with the company’s stock price rising from 660 GBP to as high as 840 GBP, followed by a dip toward the 750 GBP level. The company is a part of the FTSE 250 index, which measures the largest stocks listed on the LSE.

• IG was founded in 1974 and is headquartered in London, UK
• IG serves clients from all over the world and has sales offices in 17 countries
• The brokerage offers the trading of OTC & exchange-traded derivatives, stocks, and ETFs
• The company offers over 18,000 different assets for trading to choose from
• The primary trading platform offered by IG Group is MetaTrader 4

IG has had a mixed first half of the year, which is in part due to differences in reporting periods. The latest trading update, up to 31 August 2022, was published on 15 September. 

The highlights from the update showed total quarterly revenues reaching GBP 241.8 mln, out of which almost GBP 200 mln was attributable to OTC derivatives trading. Stock trading represented the smallest segment, with just GBP 6 mln in revenue.

IG is seeking to expand its service offerings in the US, hiring a new Chief Marketing Officer to lead the group’s campaign in North America.

The pandemic boom and post-pandemic decline in user activity has meant that IG has welcomed only 19,200 new clients, as opposed to the 26,200 from the previous year. This decline was expected by management as trading activity started to normalize.

IG Group also announced a share buyback program, which is set to conclude in FY23, with a total of GBP 150 million worth of shares being repurchased by the company.

StoneX Group (NASDAQ:SNEX)

StoneX Group is a diversified brokerage holding company headquartered in New York City. Founded in 2009, the company is behind well-established names in the brokerage industry, such as GAIN Capital and City Index Group. Stonex Group is listed on the Nasdaq and is a part of the S&P 600 index. 

• StoneX offers a diverse lineup of tradable assets - ranging from securities to commodities such as metals and livestock
• The company has added cryptocurrency custodian services through their subsidiary StoneX Digital LLC

StoneX is one of the brokers that has enjoyed a successful first half of 2022. The latest financial results from Q2 of the year have been especially impressive considering the already large volumes of revenue that StoneX Group generates on an annual basis. 

The highlights from Q2 financial report are:

• Revenues reached $18.89 bln (up 85.8% YoY)
• Net income figure of $49 mln (up 43.6% compared to Q2 2021)
• Diluted EPS reached 2.37, which is 42% higher than Q2 2021
• Net profit margin down 23.5% to 0.26%

While gross revenue increased a whopping 86%, profit margins are razor thin, which has been a continuing issue for SNEX. StoneX also spent a lot of cash on the launch of StoneX Digital, among other ventures - reducing cash reserves by $2.75 billion.

StoneX also became a member of the SWIFT Platform Partnership Program, which will enable StoneX customers to have direct access to the SWIFT API platform for global payments.

The stock has performed well across 2022. Starting off in a $60-65 range, the stock currently sits just below the $90 mark, due in part to the revenue boost and the launch of StoneX Digital. 

Swissquote (SWX:SQN)

Swissquote is a brokerage firm based in Switzerland. The company was founded in the year 2000 and is listed on the SIX Swiss Exchange. The company’s stock has underperformed considerably since the start of 2022 - shedding nearly half of its market capitalization throughout the first half of the year. Swissquote is a multi-asset brokerage firm that offers:

• Stock, ETF, cryptocurrency, Forex, and CFD trading, alongside derivatives such as futures and options
• The company offers their services on MetaTrader 4 for Forex and CFDs, and eTrading for stocks, fixed-incomes, and cryptocurrencies
• 42% of Swissquote’s customers are based in Switzerland
• 78% of trading services offered are B2C, while only 22% are B2B
• 82% of assets deposited at Swissquote are invested, while 18% are held as cash deposits, with total gross deposits amounting to CHF 51.8 bln

The first half of 2022 saw Swissquote’s revenues drop year to year, with CHF 200 million in H1 2022, as compared to the same period in 2021, which was CHF 264.4 mln. 

64% of Swissquote’s net revenues in the first half of 2022 came from Swiss domiciled and 74% of revenue was generated from B2C trading, while money managers and funds amounted to 26% of Swissquote revenues. 

The first half of the year saw Swissquote welcome 34,209 new customers, which beats the H2 of 2021, but falls short of the 49,552 in H1 of 2021. The average deposit size per account amounted to CHF 99,139, which is lower than H2 2021, but which is in line with the increase in active accounts over the period, the number of which climbed over 500,000 for the first time. 

NAGA Group (ETR:N4G)

NAGA Group is a multi-asset brokerage firm based in Germany. The company is listed on the Frankfurt Stock Exchange. The latest financial statements of 2022 have not yet been published, which has caused the stock to sink since the start of the year.

• NAGA has clients in over 100 countries, with offices on 3 continents
• 5 different asset classes with over 1,000 tradable instruments
• NAGA is focused on social trading and offers copy trading on all of its assets
• The company is set to acquire licenses as Crypto Service Asset Provider in Cyprus and ASIC Market Maker in Australia, with a Virtual Asset License also pending in the UAE.

NAGA Group’s sporadic financial calendar and an overall worsening economic outlook across the EU has caused the stock to sink throughout the year, with the price falling from EUR 7.7 to as low as EUR 1.15. The second quarter results from 2022 could have a major impact on the stock price and cause a rally around the stock if positive financial news is announced. 

Listed FX brokers performance summary

The second snapshot of the year looked at licensed brokers from around the world, with different backgrounds, and different client bases. The year has been a mixed bag in terms of results, with some brokers, such as XTB, StoneX, and Plus500 being among those that enjoyed great success throughout the first half of the year. 

Due to different regulations and governance, the companies report financial statements in different currencies and across different periods. Fiscal years that do not have the same starting seasons can be tricky to size up and compare - while periods may be comparable, the internal framework of the company’s management may cause significant differences in how quarterly reports are presented. 

The snapshot aimed to compare the financial performance of listed FX and CFD brokers to see a full spectrum of the brokerage industry and their performance in a changing market.