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Screenshot of a breaking news alert e-mail from Q2 2017
IG Group (LON:IGG) has reduced the spreads on as many as 42 currency pairs, making spot FX trading markedly cheaper for its clients. The move was announced in the end of July and now clients of the broker can make use of better trading conditions.
The list of FX pairs covered by the cut includes a variety of instruments, but is quite clearly focused on Australasian pairs, like AUD/JPY, for instance. The latter now comes along with a minimum spread of 2 pips only, if a trader has a standard account with IG. This represents a 42% cut from the previous level.
Bearing this in mind, it is important to note that this refers to floating spreads and thus clarification with regards to the typical spread is required. For AUD/JPY it has been reduced to 3 pips, which is advantageous for at least two reasons. One reason being that this currency pair is offered by few brokers, and another that the handful of firms that do offer this currency pair offer higher spreads. For example, with Saxo Bank the target spread on AUD/JPY is 5 pips.
Interestingly, whilst IG competes with Saxo Bank for AUD/JPY order flow, many pairs including the DKK are in also among the list of instruments enjoying spread reductions: USD/DKK, GBP/DKK and EUR/DKK have been subject to reductions in spread by IG. Pairs which include other Nordic country currencies such as the Swedish krona (SEK) and the Norwegian krone (NOK) are also on the list. Traders keen on more exotic pairs, like TRY/JPY (Turkish Lira/Japanese Yen) and even GBP/ZAR (British Pound/South African Rand) or USD/MXN (US Dollar/Mexican Peso) would likely be interested to find that the spreads on these have been slashed too.
The cuts in some cases reach as much as 50%, with a poignant example being the reduction of the spread on the GBP/AUD pair, with the minimum difference in the bid/ask price now at 3 pips and the typical at 5 pips. This is better than the 9 pips spread on the same pair offered by Saxo Bank but a notch worse than the usual 4 pips spreads which can be achieved for the pair if trading with Oanda.
The mentioning of Oanda is not random here, as the FX broker opened a Sydney office in April this year and officially started its Australian operations about a month later. As can be expected from a company of the size and reputation of Oanda, this is likely to generate substantial competition on the increasingly populous Australian retail FX market. IG, which has offices in Australia and New Zealand has enjoyed a leading position in the Antipodes for several years in a row, in accordance with studies conducted by Investment Trends. However, the Investment Trends study which was published in May 2014 stated that IG is actually losing share amid the top FX service providers in Australia. At the same time, competition from companies such as FXCM and AxiTrader, has been making its presence felt, with these firms gaining pace and market share. Meanwhile, Plus500 is rising in the UK.
Clearly, in these days of fierce competition, retail FX participants drive a hard bargain, thus in order to ensure their loyalty, spread reductions are inevitable.
For the official listing of spread cuts, click here