US Expansion and Offshore Clients: 3 Key Points in IG Group's Annual Report

It’s that time of year for IG Group. The retail brokerage powerhouse has released its financial results and report for the last fiscal year which, for the firm, ended on May 31st.

From a changing client base to expanding into new jurisdictions, the firm had a lot to say about the last year and its plans for the future.

Having gone through the report, we’ve identified some key takeaways for your reading pleasure. So sit back and enjoy as we present you with three of the most important points contained within IG Group’s financial report for 2018.

IG Group Performed Well Last Year

Put simply, IG Group made a decent amount of cash last year. The firm saw a substantial uptick in its net revenue and operating profit, despite no substantial increase in operating costs.

In the 2017 fiscal year, IG Group reported net revenue of £491.1 million ($644.95 million). Today’s report indicates that the company was able to build on that and increase its net revenue by 16 percent, to £569 million ($747.26 million).

Growth in the broker’s net revenue was impressive, but increases in its operating profit were even better. The firm revealed an operating profit of £281.1 million ($369.16 million), a 32 percent increase on last year when the equivalent figure was £213.4 million ($280.25 million).

This growth took place without the firm having to drastically increase its operational expenses. This year, IG Group stated that it had operational expenses of £254.2 million ($333.84 million) - an approximately 1 percent increase on last year when the broker reported the same costs as being £252.5 million ($331.60 million).

The firm’s client base is undergoing change

By now, everyone in the retail industry should be familiar with the near omnipresent regulation on contracts-for-differences (CFDs) that will be implemented by the European Securities and Markets Authorities (ESMA) this August.

IG Group, as it has stated previously, predicts that it will lose approximately 10 percent of its revenue in the quarter proceeding with the implementation of the Regulation Regulation Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority ( Read this Term. As with every other firm, IG Group also has to make changes to its business strategy to ensure it can maintain its high levels of revenue.

Firstly, the firm is ramping up its professional service efforts. As reported on in detail earlier today by yours truly, ESMA’s regulatory strictures do not apply to clients that are classified as professional.

Last November, IG Group launched an online service that streamlines the reclassification process. These efforts seem to have paid off, with the firm expecting 50 percent of its revenue to come from professional clients in the coming months.

For those poor plebeians, unable to meet the requirements needed to reclassify as a professional, there is hope yet. IG Group will enable them to contract with their other entities, outside of the European Union, which aren’t subject to those pesky ESMA rules.

If they don’t want to leave the regulatory confines of the Old Continent, clients will also be able to trade in a range of new CFDs. IG Group did not reveal exactly what these CFDs will be in, only that they are going to be compliant with ESMA’s new regulations.

IG Group is expanding into new jurisdictions

Brexit Brexit Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Brexit stands for British Exit, or in reference to the United Kingdom’s decision to formally leave the European Union (EU) as declared in a June 23, 2016 referendum. In a more immediate sense, a tight vote and unexpected result helped drive British pound (GBP) to lows that had not been seen in decades.The day following the referendum, former Prime Minister David Cameron resigned from office where he was replaced by Theresa May, who later resigned from office on June 7th, 2019. Active Prime Minis Read this Term continues to loom on the horizon and, despite the wishes of many that it would stop looming there, companies are having to take precautionary steps in response.

IG Group has not, it appears, been immune to this process. The firm’s report indicates that it will be opening a new office in Germany to maintain its foothold in the European markets.

The broker has applied to the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), a German regulator with an unpronounceable name, to establish an office in Frankfurt. According to IG Group, the new office will “will serve as a regional hub for the Group’s well-established EU business” but won’t impact its UK operations.

It’s not just Germany that will feel the warm embrace of IG Group’s expanding operations. The company also has plans to open an office in the Land of the Free to cater to the over-the-counter FX market.

The firm confirmed today that it has its sights set on Chicago and has already made the requisite hires for the opening of an office in the windy city. It noted that it expects the office to open in first half of its 2019 fiscal year.

Positive outlook

IG Group looks set to do well in the year ahead despite a tough regulatory environment. It is taking the right steps to mitigate the adverse effects of ESMA’s regulation, even if it does predict a short-term loss in revenue.

The same is true for its efforts at its expansion. The broker has hedged itself against the risks that Brexit poses and its US business could succeed if it can fill the gap that exists in the country’s current FX market.

Finally, the firm had a solid fiscal year in the 12 months up to this May. With the headwind from those results, the firm can likely weather the stormy seas of Brexit and ESMA in the coming months.