Controversial financial betting firm Plus500 is poised to take on traditional stockbrokers by launching a conventional share trading service.
David Zruia, the new chief executive, told The Mail on Sunday that the FTSE250-listed firm is preparing to move into physical equity trading.
Plus500 currently specialises in selling contracts for difference – controversial deals which allow traders to place bets on the movements of shares, gold, oil and other markets without actually buying the underlying assets.
Controversial: FTSE250-listed Plus500 is preparing to move into physical equity trading
CFD traders can turbocharge their bets by using debt, or leverage, so that potential returns and losses are amplified when prices move.
But this makes the trading risky. The City watchdog has said CFDs should be for sophisticated investors only.
In a crackdown in 2018, the Financial Conduct Authority warned that CFD trading was being ‘aggressively marketed’ to the public ‘meaning retail consumers are buying a product that isn’t appropriate for them’.
A move into mainstream stockbroking for Israel-based Plus500, which sponsors Atletico Madrid football team in Spain, would put the firm in direct competition with FTSE 100-listed Hargreaves Lansdown and AJ Bell.
Zruia, 36, said: ‘We are looking at share dealing. Many of our customers, as well as holding trading accounts, hold the underlying asset.’
Plus500 shares crashed last year after it was forced to correct its 2017 annual report, causing substantial embarrassment.
The company initially said it had not suffered losses from punters’ trading positions, but in February 2019 it admitted to a ‘drafting error’ after the company’s finances showed it took a $103million (£77million) trading hit in 2017.
The crackdown on CFD trading – initially introduced in 2018 by European regulators and made permanent by the FCA last year – also weighed on profits.
The new rules stopped firms using inducements to get customers to sign up and protected traders from losing more than the total funds in their account.
Plus500’s share price fell as low as £4.95 in 2019. However, on Friday its stock was flirting with £15 a share – within a little more than £5 of its all-time high in August 2018 of £20.08.
The firm has been one of the main beneficiaries of amateur traders trying to take advantage of the oil price collapse and the stock market sell-off triggered by the pandemic.
Zruia said: ‘Most of our customers traded equities and commodities – especially oil. This trend continues. Trading on oil was very popular and still is.’
Some of the London-listed stocks that punters have been betting on since the crisis began include Cineworld, British Airways owner International Consolidated Airlines Group and easyJet.
Zruia said Plus500 is back weighing takeover deals as a means of expanding the business.
Last year, Plus500 held talks with Gain Capital, the US-listed owner of London-based spreadbetting firm City Index, about a merger. However, the talks eventually collapsed over price.
Plus500 is now looking for smaller firms with a licence, technology or platform that can be integrated with its own technology.
In June, Plus500 posted a jump in first-half revenues to $564.2million from $148million a year earlier.