XTB Report Sharp Drop in Revenue and Profitability in Q3-2018 Driven by ESMA Regulations - The Industry Spread

Karthik Subramanian

Karthik Subramanian has been a professional trader and fund manager over the last 18 years. He is basically a software developer who made the transition to financial domain around 18 years back as the attractiveness of the financial markets proved too much for him. He lives in Chennai in India along with his wife and son. He began his career as a software developer in 1999 and then gradually moved into the financial industry as he began trading stocks in his pastime. He then moved into the financial markets full time and then shifted his focus to the FX markets due to the liquid nature of these markets. Since then, he has been trading FX diligently and his favourite pair are the EURUSD and EURJPY. Over the last couple of years, he has found blockchain to be of high interest and considering his background in software and finance, he has since assembled a team of highly talented developers who have since worked on a variety of projects like crypto exchanges and blockchain architecturing. Now, he balances his time between trading and commenting on both the FX and crypto markets. He has worked with many publications including FX Street and Finance Magnates, which has helped him gain experience and also recognition across the industry. He loves to write and this passion has helped him to reach out across the FX and crypto industry. Right now, he works on his pet projects in the FX and crypto industry and spends his time writing and managing his blockchain team and helping it to reach higher.


XTB Report Sharp Drop in Revenue and Profitability in Q3-2018 Driven by ESMA Regulations

November 10, 2018

XTBThe Polish retail Fx brokerage firm, XTB after reporting fairly strong H1-2018 results, now has reported a weak set of Q3-2018 results mainly due to the negative impact of implementation of ESMA regulations coupled with lower volatility in the market. During the period, the firm also reported lower trading volumes in CFD trading.

XTB operates retail arm XTB.com and X Open trading platform has reported total revenue of PLN 47.6 million (USD $12.7 million) for the three months period, which is 43 percent lower compared to PLN 84.2 million in Q2-2018. The first quarter result was the best-ever quarter for the brokerage firm with record revenues of PLN 113.7 million. 

The company reported a net loss of PLN 2.9 million in the third quarter, majorly due to a one-off event that led to firm paying administrative fines of PLN 9.9 million to PFSA. Excluding the one-off event, the profit is reported at PLN 6.2 million which is significantly less than that achieved in the same quarter in 2017 of PLN 31.3 million.

Polish Financial Supervision AuthorityDespite the decline in trading volumes due to the implementation by ESMA of a 30x leverage cap on Forex and CFD trading, a number of new clients continued to grow with 16.3 percent year on year growth. New clients in Q3 totaled 4,884 and the average number of active clients higher by 11 percent year on year or 2014. 

In revenue breakup, 59 percent of the total revenue was contributed by Commodity CFDs i.e PLN 27.9 million, and Index CFDs contributed just 18.6 percent to the revenue. The currency CFDs recorded a revenue of PLN 10.4 million in the third quarter, which is not in line with the expectation of the broker as it dropped over 64 percent to PLN 18.9 million from the prior year period. Total revenue generated from CFDs is PLN 47.3 million in the Q3-2018 compared to  PLN 72.5 million in the same period year earlier, signifying a drop of 33 percent.

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