CMC Markets plc CMC Markets Annual Report and Financial Statements 2021 and Financial Statements Annual Report CMC Markets plc Annual Report and Financial Statements 2021 OUR PURPOSE Strategic report 2 CMC at a glance 4 Highlights 2021 “Our purpose is to 5 Investment case 6 Chairman’s statement constantly maintain a 8 Stakeholder engagement 10 Chief Executive Officer’s statement superior and unrivalled 14 Our markets 16 Our strategy technology experience 18 Key performance indicators 20 Our business model for our clients.” 22 Technology and product 26 People and sustainability Lord Cruddas 32 Financial review 37 Risk management Founder and CEO 39 Principal risks Corporate governance 46 Board of Directors 48 Governance report The business was started in 1989 54 Group Audit Committee with a simple ethos: to make financial 58 Group Risk Committee 60 Group Nomination Committee markets truly accessible for investors. 62 Directors’ Remuneration Report This fundamental belief remains at the 86 Regulated entities heart of everything we do at CMC 87 Directors’ report Markets and staying true to that has been pivotal to our success. Financial Statements 92 Independent auditors’ report 99 Consolidated income statement 100 Consolidated statement of comprehensive income 101 Consolidated statement of financial position 102 Parent company statement of financial position 103 Consolidated and parent company statements of changes in equity 104 Consolidated and parent company statements of cash flows 105 Notes to the consolidated and parent company Financial Statements Shareholder information 144 Shareholder information Read more at cmcmarketsplc.com CMC Markets plc Annual Report and Financial Statements 2021 1 Strategic report CMC at a glance Delivering a bespoke proposition that is constantly evolving Our scalable platforms allow us TECHNOLOGY PLATFORM AND “TARDIS” to offer a wide range of financial products with high service availability, Our superior platforms and technology, combined with our Trade and Risk Data Intelligence System (“TARDIS”) deliver a best-in-class trading even during times of extreme volatility, experience for our clients and partners. TARDIS was built in house and to an ever-broadening pool of clients is fully integrated into all of our front-end trading platforms. and partners. We are also continually The system underpins and generates real-time pricing, automates trade improving the functionality of the execution and optimises our risk management process through better platforms to both improve our aggregation of client flows. It also brings scale and stability to our platforms, service to clients and to remain especially during volatile market conditions. This enhances the client trading experience and lessens the risk of price quotation outages. a market leader. Clients Stockbroking Business to • Dedicated service • International shares Business • Unique value add • Native mobile app (“B2B”) offering products • White label offerings • White label offerings • Competitive pricing • Online exchange- • Grey label offerings • Customisable platform traded options • API connectivity TARDIS • Stable pricing during volatility • Automated pricing • Enhanced client trading experience • Efficient flow aggregation • Sets us apart from competitors THE PRODUCTS WE PROVIDE Leveraged Non-leveraged Contracts for Spread betting Multi-asset Outsourced Stockbroking difference (“CFDs”) class liquidity trading platform technology A financial derivative A product available Under our B2B arm, CMC We outsource our Australian clients are product which allows exclusively to residents Markets Connect acts platform technology to offered the opportunity clients to speculate on in the UK and Ireland as a non-bank liquidity clients also under the to trade Australian shares price changes in an which is similar in many provider offering access CMC Markets Connect and International shares underlying financial asset, aspects to our CFD to a range of asset brand, where our from 41 exchanges over without certain costs and product. More classes including Spot award-winning CMC 15 countries. Clients can limitations associated information is available FX, the global institutional trading platform can be choose from a wide with physical ownership. on www.cmcmarkets.com. standard in FX trading. fully customised under variety of instruments, More information a white-label partnership including shares, options, is available on or alternatively under a managed funds, warrants www.cmcmarkets.com. neutrally branded platform and exchange traded for regulated entities funds (“ETFs”). looking to introduce clients or trade on their behalf. CMC Markets plc 2 Annual Report and Financial Statements 2021 Strategic report OUR GEOGRAPHICAL REACH OUR CLIENT BASE CMC Markets has operations in 13 offices across many of CMC predominantly attracts retail and elective professional the world’s leading financial centres. The Group operates clients to its Next Generation platform and has a significant a hub-and-spoke model, with London being the Group’s proportion of trading activity generated from institutional headquarters, Germany being the hub for our European clients and stockbroking clients. operations and Sydney being the secondary hub to support the Asia Pacific & Canada (“APAC”) region. This approach enables the Group to achieve the optimum balance between operational gearing and efficiency. Net trading revenue1 by region Net trading revenue by client base CFD and spread bet B2B2 10% UK 30% Stockbroking B2B 11% Europe 16% CFD and spread bet B2C3 76% APAC & Canada 54% Stockbroking B2C 3% 30Read more about +1654Nnet trading revenue on page 32 10+11+76+3N 1 CFD and spread bet gross client income net of rebates, levies and risk 2 Business to business (“B2B”) – revenue from institutional clients. management gains or losses and stockbroking revenue net of rebates. 3 Business to consumer (“B2C”) – revenue from retail and professional clients. Continents Countries Offices Total active clients4 4 12 13 308,644 4 Active clients represent those individual clients who have traded with or held CFD or spread bet positions or who traded on the stockbroking platform on at least one occasion during the financial year. CMC Markets plc Annual Report and Financial Statements 2021 3 Strategic report Highlights 2021 Focusing on high value clients and diversifying the business OPERATIONAL HIGHLIGHTS FINANCIAL HIGHLIGHTS Net operating income1 Statutory profit before tax • Gross CFD client income up 39% to £335.3 million £409.8m £224.0m • Retention of CFD client income6 of 104% up from 89% 21 £409.8m 21 £224.0m • Significant increase in Stockbroking 20 £252.0m 20 £98.7m net trading revenue, up 72% to £54.8 million and is now 14% of 19 £130.8m 19 £6.3m total net trading revenue • Released native Stockbroking CFD active clients2 Stockbroking active clients2 app in March 2021, Dynamic Trading in May 2021 and Spot FX products in June 2021 76,591 232,053 • Operational resilience 21 76,591 21 232,053 demonstrated through CFD platform uptime of 99.95%, despite 20 57,202 20 181,630 periods of exceptionally high 19 53,308 19 123,486 trading volumes during the year • Revenue per active client up £810 (22%) to £4,560 and active CFD revenue per active client3 Basic earnings per share clients up 19,389 (34%) to 76,591 • B2B net trading revenue £4,560 61.5p represents £86.3 million of net trading revenue from 21 £4,560 21 61.5p £53.7 million (up 61%) 20 £3,750 20 30.1p Read more about net trading 19 £2,068 19 2.0p revenue and our financial measures on page 32 1 Net operating income represents total revenue 4 5 net of introducing partner commissions and Gross CFD client income Ordinary dividend per share spread betting levies. 2 Active clients represent those individual clients who have traded with or held CFD or spread £335.3m 30.63p bet positions or who traded on the stockbroking platform on at least one occasion during the 21 2.0 £335.3m 21 30.63p financial year. 3 Net trading revenue generated from CFD and 20 2.0 £240.6m 20 15.03p spread bet active clients. 4 Spreads, financing and commissions on CFD 19 £216.1m 19 2.03p client trades. 5 Ordinary dividends paid/proposed relating to the financial year. 6 The percentage of CFD gross client income retained after rebates and gains or losses from risk management activities. CMC Markets plc 4 Annual Report and Financial Statements 2021 Strategic report Investment case CMC Markets is an attractive investment for the following reasons: We continuously invest in our proprietary technology for the benefit Read more about our Our technology of our clients. We offer a wide suite of products and our online and technology on pages focus and award- mobile platform is both scalable and resilient and sets us apart. 22 to 25 winning platforms financial instruments traded across 10,000+ the CFD platform and over 40,000 instruments within Stockbroking We generate CFD and spread bet revenue globally, have an Read more about our Our diverse enlarged stockbroking business in Australia, and our institutional product offering on product offering business offers additional channels to distribute our CFD and pages 22 to 25 stockbroking platforms. share of Australian 15% stockbroking market1 We serve retail, professional and institutional clients through Read more about our Our geographical regulated offices and branches in 12 countries, with a significant geographical diversity reach presence in the UK, Australia, Germany and Singapore. on page 3 of net trading revenue generated 54% outside the UK and Europe regions We put our clients at the centre of everything we do. We employ Read more about our Our client focus and train high-quality client services staff to ensure best-in-class client service on pages client service and we lead the UK industry in client satisfaction. 22 to 25 CFD active clients and stockbroking 308,644 active clients Our Risk Management Framework is a key differentiator for the Read more about our Our risk Group; our continued focus on quantitative analytics and data-driven Risk Management management decisions allows us to offer very competitive spreads and liquidity Framework on pages 37 strategy versus the underlying market.