Tuesday 4 December 2018 8:49 am

Spreadbetter IG says revenue has fallen since new European regulations introduced

Spreadbetter IG Group said today it expects revenue in the first half of the year to be six per cent lower than in the same period last year following the introduction of new European regulations that have hit the sector hard.

In July the European Securities and Markets Authority (Esma) introduced rules restricting the provision of contracts for difference (CFDs) to retail clients.

CFDs are derivatives that allow traders to take advantage of prices moving up or prices moving down on underlying financial instruments.

IG said revenue since the rules were introduced is down 10 per cent on the same period last year.

Revenue within the Esma region (UK and EU) is expected to be 20 per cent lower than in the same period last year.

Revenue from IG's Asia Pacific and other non-Esma region countries is expected to be around nine per cent higher than last year.

All figures are on an underlying basis adjusting for the 1,200 IG clients who previously contracted with a UK entity who are now trading with an entity outside the Esma region.

IG said the number of clients in the UK and EU who have decided to be classified as professional continued to increase during the period.

It said around 70 per cent of UK and EU income came from professional clients in the four months following the introduction of the new rules.

Analysts at broker Canaccord Genuity said: "The number of new active clients in the Esma region during the period was 8,200, down by 30 per cent year-on-year. We believe this decline underlines our concern for the ability of the business to attract new customers under the new Esma regime, particularly given that the period was helped by high volatility."

Analysts at Shore Capital were more positive saying: Trading conditions have been much more favourable in the last two months of this period than they were in the first quarter and September but we still regard this as a resilient overall performance for the six months and would not expect to make material adjustments to full year forecasts."

IG's share price fell 9.7 per cent today.