IG record results despite binary fracas

IG record results despite binary fracas

Tuesday, January 24, 2017 Posted by Luke Massey
Company moves to half binary offering to new customers

Spread-betting and contract for difference (CFDs) trading broker IG Group has announced record results but says it has shuttered its binary options offering to new clients due to the recent spate of regulatory pressure.

In the six months to November, IG recorded net trading revenues up 14 percent to £244.9m while pre-tax profit rose 6.7 percent to £105.2m.

The results come at a sensitive time for the retail financial traders with the financial watchdogs in various countries across Europe and further afield expressing unease regarding the promotion of certain products with binaries most often cited as being problematic.

In response, IG said today it has ceased offering its Sprint binary options product to new customers. It has also moved to introduce a Limited Risk account which it hopes will satisfy some of the concerns of the regulators with regard to leverage limits.

Peter Hetherington, chief executive at IG, said the company had "always sought… to operate to the highest regulatory standards."

He added: "We welcome the intentions of the FCA Financial Conduct Authority) and other European regulators to improve consumer outcomes across the industry, and we believe that IG’s Limited Risk account will play an important role in this."

IG saw its share price smashed, along with others in the sector including CMC Markets and Plus 500, after the UK FCA announced proposals in December which questioned the need for any financial trading house to offer binary options. The FCA also suggested new leverage limits for between 25 and 50 times the original stake.

IG said it will continue to offer the Sprint binary options product to current customers. In its results statement the company said that though the product "no longer fits with the future direction of the business”, the current offering remains popular with a section of its client base. IG said the Sprint product was worth circa £15m of annualised revenues.

Analysts pointed out the revenue increase came off the back of a heavily increased marketing spend which rose 65 percent in the first half to £35.2m. Customer numbers responded in like kind, rising 22 percent over the period.

The team at Numis suggested after the FCA proposals it expected the rest of Europe to be just as harsh, but recent moves by both the German and French authorities have been less harsh than was feared.         

“Both Germany and France decided to (in our opinion, more sensibly) protect customers by preventing them losing more than their initial stake,” the team wrote. “We now expect revenue per customer to decline by 15% as opposed to 27.5% in Europe. The only area where new regulation looks probable in the future is Dubai.”

Totally Gaming says: IG is effectively accepting to inevitable with its move to end the promotion of binary options to new customers. With the ball now in the court of the regulators, the future of the product now hangs in the balance but as Numis point out, as regards other jurisdictions in Europe, the situation might be less bleak than feared.

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