IG responds to FCA leverage and bonus directives: how about foreign brokers?


IG Group trading floor

UK online trading leader IG Group Holdings plc (LON:IGG) issued a brief response to this morning’s new directives from the FCA, banning bonus payments to retail traders and limiting CFD trading leverage to 50x.

The response was issued after IG shares, and those of its main publicly traded competitors including CMC Markets Plc (LON:CMCX) and Plus500 Ltd (LON:PLUS), tumbled by about 30% following the FCA’s announcement.

While stopping short of saying that the new rules won’t really harm its business, IG did mention that its initial view is that ‘certain of the FCA proposals could enhance client outcomes‘.

IG also pointed out that the FCA’s proposals do not appear to directly apply to firms operating from outside the UK offering CFDs and binaries to clients in the UK from another EU member state, allowed under EU MiFID passport rules.

The IG press release on the matter reads as follow:


06 December 2016

IG GROUP HOLDINGS PLC

Response to FCA Consultation Paper

ig-logo-250x250IG Group (“IG”, “the Company”), a global leader in online trading, notes today’s Consultation Paper issued by the FCA (CP 16/40 – Enhancing conduct of business rules for firms providing contract for difference products to retail clients).

IG firmly believes in robust and proportionate regulatory oversight of the CFD sector in the UK and Europe.  The Company recognises that there are shortcomings in the approach to the marketing of CFDs and binaries by certain firms, often operating from outside the UK.  The Company has operated and will continue to operate to the highest standards in the industry, and its initial view is that certain of the FCA proposals could enhance client outcomes.

The Company notes, however, that the FCA’s proposals do not appear to directly apply to firms operating from outside the UK offering CFDs and binaries to clients in the UK on a cross-border services passport from another EU member state.

IG will carefully consider the implications of the FCA Consultation Paper and the courses of action open to it, and will respond in accordance with the timeline provided of 7 March 2017.

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  • Adil Siddiqui

    The industry needs to come-together and challenge this, we have a number of listed firms which have shareholder responsibility and regardless of being multi-asset they wont generate the earnings, a balanced leverage is fair for the sector.

  • Perplexed

    Adil – shouldn’t “the industry” embrace this, especially the big brokers? This will kill all the little guys who offer 200x or 500x leverage to dupe people into trading and who offer bonuses. Their biz models just got stomped. The big guys like IG, CMC, PLUS500, all those traders will migrate to them. Isn’t this good for them. And, for traders as well?

    • Adil Siddiqui

      I totally agree – outfits that have no regard for clients should be side-lined but if we look at inter-day margin on a future its potentially high, regulators need to find the balance of ensuring clients are protected but at the same time the market is evolving and creating new products and services

      • Still Perplexed

        I’m confused Adil. If you totally agree with me, then why did you state in your first comment that the “industry” should challenge this? They should embrace it, at least the big brokers.

        Also, if I’m reading the FCA directives correctly and I think that I am, there’s nothing here about inter/intra day margin once a trade is done. There’s nothing about forced closure of trades gone bad where margin is evaporating. Just at the time of making a trade, account leverage can’t exceed 1:50.

        • Adil Siddiqui

          its a clean-up exercise buddy, which is welcomed with open-arms, but there are regulated firms that appreciate the rules and guidelines and as they have the right systems & controls, its only fair for them to offer the product within a reasonable framework, for an FX or CFD trader the attraction is indeed is the gearing or leverage, im not saying over-leverage but 50 to 1 will side-line traders that do not hold excess capital and require s a lot more $$$s to open – hld and maintain positions, this goes back-to-basics for investors eg stocks where you tangibly hold and own the product which will consequently become more attractive

  • Spartancapital

    We have been shorting IG since the ESMA papers and will continue to do so. IG has caused this problem by themselves, marketing to the masses at tube stations and airports. So long as current IG management is in place we have a sell recommendation on the stock.

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IG responds to FCA leverage and bonus directives: how about foreign brokers?

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