Plus500 earnings dive as trading boom fizzles out

A BRUISING drop in earnings at Plus 500 showed the boom in amateur trading that took hold during the pandemic has begun to fizzle out.

In a trading update the FTSE250 online trading platform said turnover sank by 38pc to £250m in the six months to June.

Plus 500 and its peers saw profits skyrocket last year as ordinary people tried to take advantage of topsy-turvy markets and commodity prices.

The prices of stocks and raw materials such as oil went into freefall in February last year when it became clear Covid had spread around the world.

They mostly rebounded later in 2020 – prompting another flurry as individual traders tried to cash in on the rise.

Plus 500’s profits last year rose by 175pc to £380m and it saw a staggering 82m customer trades placed – up from 35m the year before. Plus500, which works in 50 countries, has been bracing itself for the boom in business during the pandemic to wear off and earlier this year launched a share trading platform ‘Plus500 Invest’ in a bid to attract new customers and keep the ones who had recently signed up for the first time.

The move will also help wean the Israel-based company off its dependence on controversial contracts-for-difference (CFD) products, which regulators have cracked down on in recent years.

CFDs allow investors to make high-risk bets on the price of shares, currencies or other assets. But authorities have introduced stricter rules on the amount of money amateur traders can borrow from brokers to bet on market movements, which hit profits.

Also in the first half, the trading platform was rebuked by investors over plans to hand a one-off bonus worth almost £1m to finance chief Elad Even-Chan after he cut the company’s tax bill significantly.

And in March it appointed world-renowned economist Jacob Frenkel – the former chairman of investment bank JP Morgan and ex-Israeli central bank chief – as its chairman.

While retail trading platforms are suffering now that markets are stabilising, figures from Charles Stanley suggest traditional wealth managers are faring better.

The amount of funds it oversees rose by 6pc to £27bn in the first quarter, which ended on June 30. Revenues rose by 8pc to £46m.