IG Group revenues surge as volatility returns, ESMA crackdown looms

Trading revenues at IG Group surged 30% in a record quarter for the online broker thanks to a high level of client activity.

Net trading revenue of £152.9m was swelled by 35% growth in UK over-the-counter leveraged trading, 25% from Europe, Middle East and Africa and 29% from the Asia Pacific region. The much smaller US operations saw revenues up 9%, while the nascent share dealing arm grew revenues 77% to £1.1m.

OTC leveraged revenue per client of £1,482 in the quarter was 25% higher than the year before, with group revenue per client up 12%.

For the three quarters of the financial year to date, net trading revenue of £421.3m is up 16% on the prior year. Trading in cryptocurrencies has accounted for 7% of revenue so far this year.

Client numbers grew in all parts of the FTSE 250 business, most strongly in Asia Pacific, up 9%, and with share dealing clients doubling to almost 34,000.

IG said it "remains difficult" to predict the level of revenue in the last quarter of the year as it "depends on the level of trading opportunities available to our clients and on the company's hedging efficiency".

After the European Securities and Markets Authority threatened to clamp down on marketing, distribution or sale to retail clients of CFDs late last year, IG said it expected ESMA to publish measures on this "soon".

ESMA said in January that measures could include setting leverage limits on the opening of a position between 30:1 and 5:1, with limits to vary according to the volatility of the underlying asset, while CFDs could also have a margin close-out rule, a negative balance protection to provide a guaranteed limit on client losses, a restriction on benefits incentivising trading and be marketed with a standardised risk warning.

"IG continues to believe that any financial impact from the implementation of such measures is unlikely to be significant in FY18," the company said on Thursday, adding that it was difficult to predict what impact regulatory change may have on the business in subsequent financial years.

"The company has made good progress with the actions being taken to mitigate the potential financial impact of regulatory change, and to position the business so that it will continue to deliver for all its stakeholders under a more restrictive regulatory environment."

IG claims that more than half of its European clients by are eligible to be categorised as professional and has previously calculated that any reduction in historic annual revenue would have been "less than 10% including the impact from lower binary revenue".