CMC Invest leans on wider market access to set it apart

The shutdown of TD Ameritrade’s Singapore retail trading arm in December has contributed to CMC Markets attracting new customers. Christopher Forbes, head of CMC Invest Singapore — the recently launched retail arm of the London-based brokerage — suggests that ongoing competition among the remaining players may lead to additional consolidation in the future.

TD Ameritrade’s announcement last September “to focus only on accredited investors from December onwards” coincided with the launch of CMC Invest in the same period. Forbes notes that the firm started receiving calls from “older” and “much more sophisticated” customers. 

These clients were prepared to migrate with portfolios as substantial as $35,000, a considerable increase compared to the current $8,000 average held by CMC Invest.

Forbes predicts that TD Ameritrade will not be the only one, expecting three to four more out of Singapore’s approximately 20 retail trading players to exit. He anticipates that at least two will sell their customer base or assets under management to another firm.

“We talk regularly here about who we think will survive and who we think will likely combine forces,” he says in an interview with The Edge Singapore. He acknowledges that Singapore as a market is “mature”. Still, an ongoing shift in customers’ sentiment results in market share being “gobbled” by the newer players. He claims that brokerages that provide a seamless onboarding journey, with access to the US markets and instant money transfers, will see an uptick in market share.

CMC Invest distinguishes itself by targeting a different demographic than other newer players. Instead of focusing on younger investors with smaller portfolios, Forbes mentions that CMC Invest caters to an ideal clientele aged between 31 and 42. This group is perceived to have more disposable income for trading and managing portfolios ranging from $5,000 to $10,000.

While some competitors focus on a specific client demographic, CMC has created two platforms for distinct segments: retail and accredited investors. Forbes believes this approach “is how the world is going”.

Truth and transparency 

CMC Invest may have less mindshare than well-established local brokerages with decades of operating history. Forbes points out that CMC Markets, primarily focused on contracts for difference (CFD) trading, has been operating in Singapore since 2006. He believes this extensive history demonstrates the brand’s trustworthiness.

Forbes adds that the white-label trading platforms CMC has provided other financial firms across markets such as Australia have laid the groundwork for operations. Specifically, CMC Invest serves seven banks in Australia, owning 17% of the market share. 

He is optimistic due to the diverse market access provided to clients in Australia and Singapore by Invest, spanning 16 markets such as Singapore, Hong Kong, Japan, Australia, New Zealand, the US, Canada, Denmark and more. The team is actively working to expand their portfolio by including markets in Saudi Arabia, Dubai, Korea and Thailand — regions not commonly available for investing.

In contrast, some competitors provide retail investors access to only four to five markets. Forbes notes that Saudi Aramco, Saudi Arabia’s national oil company, boasts annual earnings of around US$300 billion ($399.65 billion), making it the world’s most profitable listed company — outperforming even major US tech names. However, Saudi Aramco is exclusively listed in Saudi Arabia. “There’s no way for you to invest in them right now because not a single stock broker offers access to the country,” he says.
 
Forbes adds that CMC recently opened a Dubai office to strengthen its presence in the Middle East for both Invest and Markets. The plan will include Dubai and Saudi stocks on the platform, pending necessary licenses and due diligence. “In the long term, offering more access consistently will play out. It’s not a silver bullet, but I think it’s a long-term strategy.” 

Trust and transparency, he maintains, form the core of CMC Invest. The platform openly publishes rates for every trade settlement cost, distinguishing itself from other brokerages that claim to be “no fee” for transfers or conversions but conceal charges within the spread.

Since October, CMC Invest has significantly expanded its UK, Australia and Singapore teams. Besides opening new offices, there are plans to introduce new trading products, including a crypto platform, taking advantage of the growing interest in cryptocurrencies. Forbes envisions a long-term roadmap for cryptocurrencies, encompassing wealth management options and a fractional options platform.

CMC Market’s fortune is tied to how markets move. Reporting a loss of GBP2 million ($3.4 million) for the 1HFY2024 ending September 2023, the firm attributes this to “subdued market conditions.” The negative basic earnings per share stood at 0.8 pence, coupled with a 20% y-o-y decline in net operating revenue to GBP122.6 million. Trading net revenue — the largest contributor to total operating revenue — experienced a 32% drop to GBP87.4 million between April and September.

Market conditions 

For its more recent 3QFY2024 ended December 2023 trading update on Jan 8, CMC Markets enjoyed “a strong performance” attributed to “improvement in market conditions” led by more business from its B2B and institutional clients. The firm raised the guidance for its net operating income for FY2024 from GBP250 and GBP280 million to GBP290 and GBP310 million. The full-year earnings will be reported on April 9.  

Forbes declined to divulge Singapore’s financial specifics but notes significant growth. CMC Markets has 275,000 active customers globally, with over 200,000 individuals trading on CMC Invest in the past year. Asia’s growing affluence is a clear opportunity for the firm.

“We are pushing into institutional (B2B) with a big push from a new multi-asset platform being developed and rolled out. We hope this will become a platform which family offices, hedge funds and advisors use as a one-stop solution.”