The number of retail participants in the contracts-for-difference (CFD) market shrunk by 14 per cent despite continued market volatility, according to Investment Trends.
The ‘2016 Australia CFD Report' said that while volatility usually revitalised the CFD market, it was not the case this time, with 37,000 Australian investors placing at least one CFD trade in the 12-month period ending May 2016, down from 43,000 in June 2015.
This demonstrated the need for developing quality education programmes that boosted client activity and drove market growth, the report said.
Senior analyst, Dr Irene Guiamatsia, said the decline in CFD trader numbers was unusual, given the robust client inflows.
"The number of those entering the market for the first time was on par with a year ago, but many previously active clients stopped trading as they struggled to identify good investment opportunity," she said.
CFD trading clients also showed high levels of satisfaction with the service they received, and were more likely to recommend the provider to friends and relatives.
Smaller provider, FP Markets, scored the highest on the Net Promoter Score (a client advocacy metric). Other providers in the top five list include AxiTrader, IG, Saxo Capital Markets and CMC Markets.
Meanwhile, 44 per cent of active CFD traders were open to switching providers over the next 12 months, up from 35 per cent a year ago, while a third of that group remained undecided.
"There is a clear need for providers to uphold the highest possible standard of service to keep their clients happy, while client acquisition opportunities abound for those who are better able to showcase their value proposition to traders open to making a move," Guiamatsia said.
Traders also said segregation of client money and fee and charge transparency were good indicators of trustworthiness, the survey of more than 15,000 investors and traders found.