CMC Markets: Curiosities

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Curiosities

CMC Markets was initally established as a web-based forex firm. After a sheepish start, and over recent years, CMC Markets has developed into one of the leading global derivatives broking operation with 17 offices around the world.
CMC stands for Currency Management Corporation (CMC), the parent company of CFD and Spread Betting provider CMC Markets.
The son of a Smithfield market porter who left school at the age of 15 for his first job as a telex operator at Western Union, Peter Cruddas established the business in 1989 with just £10,000. Cruddas still owns an 87% stake in the derivatives brokerage business, having sold 10% to USA investment bank Goldman Sachs (GS:NYSE) in 2007 with the balance owned by staff. Having stepped back from the business somewhat, he returned to day-to-day involvement in August 2009 having appointed Doug Richards, formerly chief financial officer, as chief executive, and recently moved his home back from Monaco, from where he commuted, to London.
Peter Cruddas, founder and majority owner of CMC Markets and a well-known businessman and philanthropist earned £16m in one year from chairing his company, the derivatives company CMC Markets. Simon Waugh, Centrica's former sales and marketing chief, is now executive chairman of the board.
Peter Cruddas is the largest donor to The Prince's Trust and The Duke of Edinburgh's Award International Association for whom he is Global Benefactor.
CMC Markets was founded in 1989 and today has operations in the UK, Australia, Canada, Germany, Singapore, China, New Zealand, Hong Kong, Sweden and the US with clients in over 70 countries worldwide.
Nowadays CMC is one of the global leaders in online derivatives, have an annual transactional turnover of about £1 trillion and Goldman Sachs have acquired a 10% stake in the business in 2007 which netted Mr Cruddas with £140m. In December 2010 Goldman Sachs reportedly wrote down the bulk of its £140 million stake in the company, thus reducing the value of the holding on its books in order to reflect the 'passive' nature of its investment and its view of the present liquid value of the company.
CMC Markets Plc acquired Digital Look in May 2007 -> 'Founded in 1998 by former JP Morgan executive Mark Pritchard, and financial journalist Andy Yates, Digital Look has grown to become one of the UK's largest and most popular financial and investment portals offering a comprehensive range of market leading data, tools, and research to help private investors and traders make informed investment decisions.'
Takes 95% of all trades via the web. It was the first to pioneer the idea of the rolling cash bet (where the financing element is charged separately to the account each night so the price of the spread bet is much closer to the underlying market), though many other firms have since followed suit.
Hedging: 'Some analysts said CMC's hedging practices, as described in its prospectus, showed less hedging of risk than expected, although Mr Cruddas said the company's hedging was appropriate.' Financial Times. However, I spoke to the new head dealer sometime ago, and he said this was incorrect and that CMC Markets has now adopted a policy of actively hedging client trades.
The company employs over 1000 people around the world. Between 4,000 and 6,000 new CMC accounts are being opened each month by private clients. In August 2008, CMC announced 130 redundancies at their London offices, amounting to about 10% of the UK workforce but industry insiders suggest this was because CMC Markets had become too top heavy compared with its competitors.
Interestingly, employees at CMC Markets are not allowed to trade a personal account, apparently this is a company policy put forward by Peter Cruddas and a policy informed by his own experience when working as a broker: 'I was more concerned about my own position from day one. I said 'I'm not going to do it with CMC.'' {quoted from Peter Cruddas' Interview with the staff at Shares Magazine}
During the fiscal year ended March 2009, the CMC Markets Group transacted over 30 million trades at a value of US$1.5 trillion and now has over 76,000 active client accounts. This represents a growth of 36% in active customers and a 50% growth in trading volumes over a one-year period. The financial results for CMC Markets for the year to March 2009 were somewhat dimmer showing a pre-tax loss of £15.1m, compared to profits of £57.2m last year (2008), on revenues up 6.5pc to £193.2m. CMC attributed the loss from writing down the goodwill from three recent acquisitions, and £16.1m of restructuring costs relating to the loss of about 350 staff and the closure of seven regional offices.
In the 12 months to 31 March 2010, CMC Markets generated sales of £149.7 million and its earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to £17.1 million. The company is currently preparing a flotation on the main market in the next 18 months to three years.
The company is believed to have in excess of £80m in liquid funds in the bank [December 2010] and presently has a record number of clients and client money - but is not thought to be completing a record number of trades [December 2010]. Current trading is also thought to be positive, although behind previous record years, with a profit of between £15m-£20m booked in the first six months of the year.
CMC's staff are reported to have distributed record bonuses last year (2013) with Cruddas pocketing most of a £12 million dividend, which happens to be the first in six years, after a prior £4 million loss turned into a £32.8 million pre-tax profit. Despite market volatility, the firm has just decided to pay a £6 million interim dividend too. (2014)