IG Group has received around 15,000 applications since November 2017 from clients to elect to be categorised as professional, and 3,800 clients are now categorised as professional.
IG says it has continued to perform well in the final quarter of FY18, with net trading revenue for the full year forecast to be around £565m (FY17: £491m).
The Group expects the product intervention measures announced by ESMA in March 2018 to come into effect in the first half of FY19. As previously guided, IG believes that the reduction in historic revenue from the implementation of the measures announced by ESMA, taking into account the expected proportion of revenue that will be generated from clients categorised as professional, would have been approximately 10%. The company expects to return to growth after FY19.
Regarding professional clients, the IG says it has received around 15,000 applications since November 2017 from clients to elect to be categorised as professional, and 3,800 clients are now categorised as professional. The Group’s process for assessing these applications is appropriately rigorous and over three-quarters of the applicants to date have been rejected.
Clients categorised as professional contributed over 35% of UK and EU OTC leveraged revenue in the last three months, and the Group continues to expect this proportion to rise to 50% when the ESMA measures come into effect.
There are a number of actions that retail clients may take in response to the ESMA measures, IG says. The Group will allow appropriate retail clients to continue to trade as they choose where this is fully compliant with the regulatory rules.
IG believes that macro trends will continue to fuel business growth. The business expects to benefit from its US subsidiary serving the OTC FX market, which is set to go live by the end of the first half of FY19, from the MTF in Europe that is expected to be live for FY20, and from acquiring licences to operate in jurisdictions in selected emerging markets that fit IG’s criteria.
IG also notes the recent action by large technology firms on inappropriate advertising and marketing, and on unlicensed operators in the industry. These actions include introducing bans on the advertising and marketing of cryptocurrencies and binary options, and the requirement that firms advertising and marketing CFDs can demonstrate that they are appropriately licensed in those jurisdictions in which the services are being promoted. IG also expects that some of the large payment and card providers will soon introduce rules to ensure that these businesses only facilitate payments from and to clients in jurisdictions in which the firms are appropriately licensed.
IG does not anticipate that the actions currently being taken, if applied appropriately, will have any significant impact on its business.