Trading Places

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What's going on?

Shares of UK-based CMC Markets and Plus500 – companies that allow investors to borrow money to bet on the price moves of assets (including cryptocurrencies), without actually owning them – rose on Thursday, helped by better-than-expected profits and positive outlooks.

What does this mean?

CMC’s stock rose by 3%, after growing its annual profits to the tune of 16% by focusing on more active, experienced and often richer “high value” clients – who make up about 10% of its customers. Meanwhile, hot off the heels of reporting a record quarter in May, Plus500 said its customers have continued trading things like cryptocurrencies en masse, meaning it’ll have an even better year than it thought. Its shares rose by 7%.

Why should I care?

For markets: Regulated cryptocurrency markets are closer to becoming a reality.

Cryptocurrency platform Circle Internet Financial – backed by investors including Goldman Sachs – plans to ask US regulators for a banking license. Crypto-exchange Coinbase has done the same (acquiring Keystone Capital on Wednesday to help with this effort), which could further legitimize crypto businesses and expand the range of services they can offer customers. Large regulated players in the space may help to relieve concern among investors around the perceived safety of investing in cryptocurrencies – and lead more big name investors to wade into crypto waters.

The bigger picture: Europeans will take less risk when trading from August.

Starting from August, new rules from the European Securities and Markets Authority (ESMA) take hold. These set limits on the types of assets non-professional investors are allowed to trade, and how much they’re allowed to borrow in order to bet on the price moves of other assets (since if you lose money, you’ll have to pay it back). The regulator hopes to protect investors from “significant losses” – and companies like CMC are braced for changes in their customers’ behavior.

Originally posted as part of the Finimize daily email.

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