Retail Forex and CFD broker Markets.com, a unit of Playtech PLC (LON:PTEC), has issued pink slips to a large number of its sales, retention and customer service employees in both Israel and Bulgaria, as part of a major restructuring. More than a hundred employees in Israel, and several dozen in Sofia, Bulgaria have been affected.
The move affects many of the employees of TradeFXL, the Playtech unit which served the group’s online brokerage brands including Markets.com and binary options broker TopOption.
Apparently many top-level decisions at Markets.com are being made nowadays by Playtech management. One of those decisions was to automate the operations of Markets.com and the group’s other online trading brands. And, to remove incentive compensation (i.e. commissions) for most of those employees who remained.
The layoffs and departures have occurred in stages since last October, but apparently accelerated over the past few weeks since the company’s planned acquisitions of rivals AvaTrade and Plus500 were called off (more on that below).
Apparently a large number of sales and retention staff were summarily laid off, while another group was offered to stay but on new terms – fixed salaries instead of salary-plus-commission. Not surprisingly, many of that second group of employees have also left, especially the higher-performing sales people who could no longer earn large commissions.
The move to automate is not a new one in the industry, but seems to be a big gamble at a broker such as Markets.com, which as far as we can tell was performing very well of late before implementing the changes.
The reasons behind the move?
Other than the obvious benefits of automation (less people to manage, lower costs), a major driver was avoiding future potential regulatory problems.
Apparently the new bosses at Playtech were concerned with all the telephone contact commission-hungry sales and retention people were having with clients – a feature at many Forex brokers – and made a strategic decision to automate (virtually) all sales and retention operations, and eliminate commissions.
Internally, the company has been referring to operating ‘more like a bank’, meaning a more conservative approach to the business.
Playtech Plus500 deal cancelledThe restructuring is in part an outcome of Playtech’s inability to close on the acquisition of rival Plus500 Ltd (LON:PLUS), and adopt Plus500’s ‘automated’ approach to customer acquisition and retention. Playtech had offered to buy Plus500 mid last year for $700 million. The deal was approved by the boards and shareholders of both companies, but was cancelled in November after the UK financial regulator The FCA indicated that it was not going to approve the transaction.
As we wrote at the time, beyond pure growth and the desire of Playtech’s controlling shareholder Teddy Sagi to build Markets.com into the world’s leading retail FX broker, the key behind the planned deal was acquiring Plus500’s technology and processes. Plus500 has grown to be one of the world’s largest retail Forex and CFD brokers (2015 revenues of $276 million) with a bare minimum of staff, focusing its efforts on onboarding and serving clients in as automated a way as possible.
Without Plus500, Markets.com is instead going it alone in trying to automate a lot of internal processes and operations. And that means a lot fewer employees.
As we wrote above, most affected are employees at Markets.com / TradeFXL in the company’s Tel Aviv, Israel offices. The company is also shutting down its operations in Bulgaria, engaged mainly in customer service and documentation processing, shifting some of those jobs to Cyprus where Markets.com operating company Safecap is based.
Markets.com parent company Playtech is set to release Full Year 2015 results tomorrow, Thursday, February 25. We would expect the announcement will include some mention of the restructuring at Markets.com.
We have seen automating broker operations becoming a key competitive point lately among leading platform providers as well, such as at Leverate and SpotOption with its Spot+ system.