The directors present the strategic report for the year ended 30 June 2024.
The company has established its highly diversified liquidity pool and prime brokerage relation over the past few years. It has put the company in a highly competitive position to remain a matched principal broker offering CFD trading services exclusively to professional clients.
With very well controlled cost basis, the business model and market segment have been proven effective for a firm of its size, and allow it to generate sustainable revenue based on its refined price point, and nimble yet highly scalable operations.
Principal risks and uncertainties
As a matched principal broker, the company faces a range of risks and uncertainties, even though it primarily operates by matching trades between buyers and sellers and avoids holding positions in its own right. The principal risks and uncertainties faced by the company are stated below:
Credit Risk
There is a risk that one party (typically a liquidity provider or prime broker) in the transaction might default, leaving the company financially exposed, especially if the company has already fulfilled its obligations to the other party.
Regulatory and Compliance Risk
· FCA Breaches: Non-compliance with FCA regulations, such as reporting requirements, regulatory capital requirements, or anti-money laundering (AML) rules, can result in fines, penalties, or reputational damage.
· MiFID II Compliance: Failing to comply with MiFID II obligations, including best execution and transaction reporting, can lead to significant regulatory penalties.
· AML/KYC Failures: Inadequate checks on clients for money laundering or fraud can result in breaches of anti-money laundering regulations. The company also screen against onboarding any politically exposed persons (PEP), as individuals with high profile political roles, or someone who has been entrusted with a prominent public function may represent a higher risk of involvement in money laundering and/or terrorist financing because of the position they hold.
Liquidity Risk
· Liquidity Shortfall: Although trading as a matched principal broker, the company does not hold proprietary positions, and therefore it still needs to manage operational liquidity. In times of market stress, liquidity could become an issue, which may affect the competitive pricing the company usually enjoys.
· Client Margin and Leverage: In the context of margin trading, clients' inability to meet margin calls could create financial exposure for the company. The company may be indirectly exposed to sharp market movements that could cause significant losses for clients and affect the company's liquidity, however our cash balances should be enough to insulate us from this.
Legal and Contractual Risk
· Client Disputes: Clients may challenge the execution of trades or the terms of service, potentially leading to costly legal disputes.
· Breach of Contract: Failure to meet contractual obligations with counterparties or clients could result in financial penalties or legal consequences.
Cybersecurity Risk
· Cyber Attacks: The risk of cyberattacks such as hacking, data breaches, or ransomware can expose the company to significant operational disruptions and reputational damage.
· Data Breach: If client or trading data is compromised, the company could face regulatory penalties and legal challenges under data protection laws, such as GDPR.
The directors have recognised these potential risks and uncertainties and will monitor the measures already instituted in anticipation of the need to adapt and evolve in response to the company’s needs. The directors also ensure that the company is well-capitalised to a level significantly in excess of the regulatory requirements with effective implementation of policies and procedures.
Development and performance
During the year the turnover was £802,437 (2023: £883,639). At the year end the company had net assets of £2,500,229 (2023: £2,286,885), inclusive of cash balances of £369,109 (2023: £87,723).
Key performance indicators
The directors monitor the progress of the company by reference to the following:
Total turnover;
Cost base; and
Profitability.
Non key performance indicators
The directors did not monitor the non key performance indicators during the year ended 30 June 2024.
The directors of the company have acted in accordance with their duties under section 172 of the Companies Act 2006. They have consistently upheld the principle of promoting the success of the company for the benefit of its shareholders, employees, and clients as a whole. In doing so, the directors have carefully considered a range of factors and key stakeholder interests. Specifically:
The likely consequences of any decision in the long term: The directors regularly assess the long-term impacts of their strategic decisions. This includes ongoing investments in sustainable growth, innovations, and operational improvements to ensure the company's future resilience and competitiveness in the marketplace.
The interests of the company's employees: its employees are fundamental to the company's success. The directors are committed to fostering a positive and inclusive working environment, supporting professional development, and ensuring employee well-being. Competitive welfare, regular engagement and clear communication channels are in place to ensure employees' interests are actively considered in decision-making.
The need to foster the company's business relationships with clients and others: Building and maintaining strong relationships with clients, suppliers, and business partners is critical to the company's success. The directors ensure that the company engages in ethical business practices, with a focus on delivering value, reliability, and long-term partnerships.
The impact of the company's operations on the community and the environment: The directors recognize the importance of corporate social responsibility and environmental sustainability. The company is dedicated to reducing its carbon footprint and improving energy efficiency across its operations.
The desirability of maintaining a reputation for high standards of business conduct: Integrity and transparency are central to how the company operates. The directors are committed to upholding the highest standards of business conduct and ethics, ensuring compliance with legal and regulatory requirements and promoting a culture of honesty and accountability across the company.
The need to act fairly among shareholders, employees, and clients of the company: The directors are committed to treating all stakeholders fairly and equitably. This includes balancing the needs of our shareholder with those of our employees, clients, and the wider community, ensuring that no group is unfairly disadvantaged by the company’s activities or decisions.
By carefully considering these factors in our decision-making processes, the directors aim to achieve sustainable, long-term success for the company, while balancing the needs and interests of all stakeholders.
On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2024.
The results for the year are set out on page 9.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
The company manages its cash requirements ensuring the company has sufficient liquid resources to meet the operating needs of the business.
The company’s principal foreign currency exposures arise from trading foreign currency. Company policy permits but does not demand that these exposures may be hedged in order to fix the cost in sterling.
Investments of cash surpluses, borrowings and derivative instruments are made through banks and companies which must fulfil credit rating criteria approved by the Board.
The company's main business activity is regulated by FCA and the company provides its services strictly according to current UK legislation, but there is always a risk of changing a regulatory landscape which can affect the company's business. The company aims to be very flexible and react immediately in case of any significant changes in legislation and other regulatory issues, in order to adapt quickly to new business environments.
In accordance with the rules of the Financial Conduct Authority, the Company has published information on its risk management objectives and policies on its regulatory capital requirements and resources. These disclosures can be reviewed at the registered office.
The company will continue to service its existing client base of professional clients whose trades are facilitated on a matched-principal basis via straight-through processing (STP), an automated process by maintaining a high standard with an aim to exceed clients’ expectations.
The company recognises that continued investment is key to ensuring that the company continues to offer trading services backed by proprietary technology. In the new financial year, the company is looking to revamp a few key elements including its client management system, client interface and website. The company will also continue to invest in the retention of the key personnel who contribute to the company’s success.
The company will closely monitor developments associated with known significant events, in particular the 2024 US Presidential election, changes in rate cycles, and ongoing conflicts taking place in Ukraine and the Middle East, and prepare itself for any potential impacts on its operations to ensure the best possible outcome for the company and the clients it serves.
Fisher, Sassoon & Marks were appointed as auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put at a General Meeting.
As the company has not consumed more than 40,000 kWh of energy in this reporting period, it qualifies as a low energy user under these regulations and is not required to report on its emissions, energy consumption or energy efficiency activities.
Basis for opinion
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was considered capable of detecting irregularities, including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with directors and other management, and from our commercial knowledge and experience of the financial services sector;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Financial Conduct Authority (FCA), Companies Act 2006, taxation legislation, data protection, anti-bribery, anti-money-laundering and employment;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
We assessed the susceptibility of the company’s financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
making enquiries of management as to where they considered there was susceptibility to fraud, their knowledge of actual, suspected and alleged fraud;
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations; and
understanding the design of the company’s remuneration policies.
To address the risk of fraud through management bias and override of controls, we:
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates as set out in note 2 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation;
reading the minutes of meetings of those charged with governance;
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, relevant regulators including the FCA and reviewing the company’s compliance monitoring procedures and findings.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and the inspection of regulatory and legal correspondence, if any. Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or through collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
Zeal Capital Market (UK) Limited is a private company limited by shares incorporated in England and Wales. The registered office is 1 Royal Exchange, London, England, EC3V 3DG.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The directors do not consider there to be any critical judgements or key sources of estimation uncertainty involved in the preparation of the company's financial statements.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
Trade creditors include customers net equity balances of £627,401 (2023: £557,974). The corresponding amounts are included in trade debtors.
Other creditors includes the amount of £7,710,271 (2023: £7,710,423) due to Zeal Capital Market(Seychelles) Limited, a company under the common control of Zeal Holdings Limited.
The company operates a pension contribution scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
At the reporting end date, the company had outstanding commitments for future minimum rental licence payments under the contract. The amount due within one year £7,880 (2023: £7,690).
Included within turnover are sales of £751,117 (2023: £694,292) to Zeal Capital Market (Seychelles) Limited, a company under the common control of Zeal Holdings Limited.
There are no events to report.