IG Group Expects to Provide for Majority of CHF Related Client Debts
IG Group's attempts to recover client funds continue with half of the negative balances resulting from the Swiss National Bank's
According to a trading update released by IG Group (LON:IGG), for the three months to February 28, 2015, which constitutes the third quarter of the firm’s 2015 financial year, it has reported revenues totaling £91.8 million ($135.8 million). The number includes a charge totaling £11.8 million ($17.5 million) related to the Swiss National Bank (SNB’s) induced volatility.
The company highlighted in its announcement that it expected to provide for the majority of client debts it was owed, totaling £18.4 million ($27.2 million) with about half of the debtor accounts already settled.
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At the same time, the firm highlighted that the majority of the remaining debtors were not likely to be in a position to settle their obligations with the brokerage.
Excluding the SNB effects, revenues at IG Group (LON:IGG) were up during the third quarter by 7.1% to £103.6 million ($153.2 million).
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The majority of the company’s growth in the revenues per client metric came from the Australian arm of business where the number increased 16% year-on-year. The U.K. remains the main powerhouse for the company, accounting for 54% of the firm’s global revenue.
Revenues per client increased in the U.K. and Australia by 5.8% and 11% respectively, but dropped lower in Europe and the rest of the world by 15% and 3.7%.
The full effects of the negative sentiment resulting from the SNB debacle causing trades of IG Group’s clients to be settled around 0.9250 in the EUR/CHF may yet surface, as the company has received unwanted media attention in the past several weeks.
Active clients’ numbers were reported higher by 13% year-on-year, with IG Group (LON:IGG) highlighting strong growth in the US and South Africa.
IG seems not to have learned the lessons from the EURCHF debacle. They still refuse to admit their platform was at fault – they had a very small amount of EURCHF to trade in comparison to many other firms yet managed to give out the worst fills. Their answer has been to jack up margins (EURCHF margins up by a factor of 15x… rather than 100x leverage now you get 3x). And they continue to chase clients for negative balances when many other (although not all) firms have forgiven these losses, chalking it up to a black swan event which… Read more »
@ Forex Magnates: You guys posted an excellent article about FXCM. http://forexmagnates.com/fxcm-publishes-data-of-snb-mishandling-of-the-swiss-franc/
Would it be possible that you do something similar about IG?
I am curious, did IG describe its reasoning behind its decision to pursue payment from its clients affected by the SNB volatility? It does not seem obvious from an investor perspective. The risk of a reputational and regulation backlash seems higher than forgetting about £18.4M compared to its revenues, even more so if they are aware that it is highly unlikely their clients would be able to pay back. As an investor, this whole thing would scare me: poor market and counterparty risk management from IG, talk about wrong way risk!
Judging by the interview with Tracey McDermott (new FCA Head of Supervision) in todays FT (p.3 Financial watchdog to loosen shroud of secrecy) we might one dat also read something about investigations into the sector if they decide to look into it. “There’s probably more we could be saying about the sorts of interventions we make on a collective basis -the types of visits we do, why we pick particular sectors to look at and what the issues we’re concerned about are”
“IG says has discussed handling of franc surge with FCA” http://www.reuters.com/article/2015/03/17/iggroup-forex-idUSL6N0WJ2KZ20150317
I find this whole EUR/CHF situation extremely interesting from a regulatory perspective. It seems to me that a significant flaw has been exposed in both the business model pursued by spread betting firms like IG Index – and the regulatory environment in which they operate. Effectively, retail consumers have been sold a product which is capable of getting them into hundreds of thousands of pounds worth of debt within minutes, from a potential position of only hundreds of pounds of investment capital. If a financial organisation proposed the introduction of this sort of product into the retail market, the FCA… Read more »
Clients will accept a negative balance if IG can fully justify the following
Why they took 10 mins to get first order to market
Why they allowed some clients to sell via platform until 0935 and not others
Why are they not acting as principal but relying now on liquidity providers
What price did they close their trading loss at
Why has client debt gone from 17.3mn to 18.4mn
Why did they not offer guaranteed stops – did they know the risks but kept leverage the same to get more clients in
IG CEO get some PR help. IG CMC Saxo FXCM massive brand damage n incompetent risk management through the EURCHF nose-dive
Chief executive Tim Howkins said IG did nothing wrong, and had to chase up clients who had lost out on the currency swings.
“It is human nature, people would like to blame other people, and we’re the obvious person to blame. But we gave the best execution we could give in the circumstances,” Howkins told City A.M.. “ http://www.cityam.com/211845/ig-bounces-back-january-s-franc-exchange
Their best execution was the worst among all the retail brokers I know or does anyone know of worse fills then 0.9250?
Only a matter of time before the FCA looks into IG behaviour. They put their interest in front of their customers’ interest. If you are spread betting with IG Index, just change shop immediately.
On Sky Howkins responded to question about raising.margin requirements….he said they changed tiers to avoid clients building up big positions. He did not mention they jacked up deposit requirements massively. Also…you heard it here first….their risk.manager on way out….coincidence?
Do you mean their Risk Manager got fired?
Maybe the Forex Magnates Team could reach out to IG to clarify this?
This following quote makes no sense to me. If this is true how did IG manage to get the worst fills among retail brokers taking also into consideration that their exposure of 115M was small in comparison to FXCM etc.
“we deal with a considerable number of major liquidity providers – more than most of our competitors” says Kieran McKinney, director of investor relations at IG Group
http://www.fxweek.com/fx-week/news/2400581/ig-under-fire-from-clients-with-huge-negative-balances
IG CEO has zero financial markets experience. He is an ex big 4 accounting firm partner bean-counter lording n advanced levels of a superiority complex over the oik custy’s.