The IG Group Affected by ESMA Measures
The IG Group has released its preliminary financial findings for the fiscal year of 2019, which ends on May 31st. There has been a significant reduction in the group’s metrics, but somehow, they’ve managed only a small drop in profits and is slated to come back in 2020 far stronger than in 2019. This comes as bad news to the European Securities & Markets Authority, who hoped to terminate the cryptocurrency markets across Europe with product intervention measures. Even though these measures affected the IG Group, it didn’t wholly cease operations for the broker.
By the end of the fiscal year, the IG Group was able to sustain a net trading revenue of £476.9 million. When accounting in for the fiscal year of 2018, which earned the broker £569.0 Million, profits are down by 16%. The product intervention measures enacted by the ESMA caused for significant drops in trading volume across Europe, with thousands of traders opting to invest with a foreign firm.
The operating profits for the IG Group dropped dramatically by May 31st, 2019. Operating profits have plunged by 31%. In 2018, the company was able to earn £281.1 Million but in 2019 only made £192.9 Million. This is a 31% decrease in operating profits. This is even with reducing company services and dropping business operation costs down by 2% yearly.
The preliminary financial documents for the IG Group in 2019 reveal that over-the-counter leverage derivatives were the main contributor of profit for the brokerages. However, OTC’s still saw a decline in revenue compared to the same period in 2018. OTC’s being leveraged by accounts have dropped by 17% in 2019. Furthermore, only 55% of the revenue generated was from clients trading with a UK-Based Brokerage.
Even though over-the-counter derivatives were the central accumulator of profit, it was equity indices where clients were most actively trading. When it comes to the leveraged revenues from OTCs, the revenue rose by 8%. The income obtained through forex was 12% lower than anticipated, coming in at only £82 Million. This is a significant drop of 13% for forex profits but still accounted for 18% of the profits in 2019. Clients trading with cryptocurrencies was the most significant drop for this year, falling by 72% compared to the end of 2018’s fiscal year. Cryptocurrency accounted for only 3% of the profits for the company this year.
However, the IG Group has seen trading volumes rising in subsidiary offices in emerging markets. The company saw an increase in profits internationally by 36% for over-the-counter products. Globally, the firm was able to earn £17.6 Million in profits. This is a 29% growth in comparison to this time last year.
Since releasing these documents, shares for the IG Group Holdings Plc has dropped by 4.5%. A day after the release of these documents, shares are trading at £558.80. Before the announcement, shares were trading at £584.00. The IG Group will manage to survive onwards into 2020 and reclaim their lost profits.
The IG Group Clients
Unfortunately, the number of retail clients trading with the IG Group in the United Kingdom dropped by 10% by the second quarter. Since then, the retail trading volumes have remained in a stable position. The average revenue that clients received through the IG Group’s OTC Products dropped by 40%. Following the second quarter, the revenues have returned to a sustainable level. Professional clients, such as the IG Groups consumers, are more compatible in dealing with sensitive markets.
The Plan of Attack
The IG Group Holdings PLC believes that they can return to sustainable revenues in the £570 Million Zone by the end of the 2020 Fiscal Year. Based in London, England, this first plans to deliver new opportunities to clients worldwide. This will surely create a boost in profits for the broker. All products are going to be released through Spectrum, the exchange owned by the IG Group and will include new leverage products that are tiered to retail clients and professional investors.
The IG Group is also incredibly confident that they’re going to be able to capitalize on the United States Forex Market. The reason for this is because they are one of the few brokerages that are currently legally operating in the USA. By offering competitive pricing and unique client services, the IG Group will be able to maintain priority market share in the US. The brokerage first plans to target small hedge funds and offices with financial gains. If all goes well, the IG Group could see profits by the end of 2020 that are higher than £570 Million.