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Amandeep Sonewane

5 December 2018

Forex Announcements

ESMA Regulations Cause IG Europe Revenue to Drop 20%

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December 05, 2018 AtoZ Markets - UK’s online trading company IG Group Holdings plc (Ticker:- LON:IGG) has issued an update in advance of entering its close period following the end of the first half of the financial year ending 31 May 2019 (FY19).

Returns for the IG group company in the first half is projected to be around 6% lower than in the FY18 period. The ESMA’s leverage cap and Binary options ban came into existence during this period as the regulator admitted that many CFD traders lost their investments after this event.

IG Group New License & Membership

The revenue of the Group in the 4 months period is projected to be around 10% YoY down. IG Group has also reported that it is supportive of the objectives of regulators to improve their client outcomes in the sector. The group supports ESMA in its efforts to enhance the consumer protection and to achieve harmonization of regulation across the EU.

Moreover, revenue in that 4 months period in the ESMA zone is expected to be around 20% lower, with the revenue from the Group’s business in APAC and other non-ESMA region countries. It is expected to be around 9% higher. 

Almost 70% of the ESMA zone revenue during these months has generated by professional clients and their number has also increased during the period.

Additionally, the number of new OTC leveraged clients who traded for the first time with the IG group in the period was 14,600. This is down with nearly 20% YoY (8,200 in the ESMA region [H1 FY18: 11,666] and 6,400 in the APAC and non-ESMA regions [H1 FY18: 6,361]).

IG Group Europe has received its license from BaFin. This provides certainty that the group will be able to offer its regulated financial products in all EU member states following the Brexit from the European Union. Also, Group’s USA subsidiary has been approved as a member of the National Futures Association and is now registered to operate as a Retail Foreign Exchange Dealer.

The Effects of ESMA on EU Regulated Forex Brokers

For the EU regulated brokers transparency has been a major issue for foreign exchange and CFDs brokers in recent years. At present, European brokers were constrained to make some changes to their offerings like the key aspects of the broker-client relationship. The main goal of the upgraded regulation was to lessen on misleading advertising and to put a spotlight on client losses.

The Chief Digital Officer of 7Marketz Group's - Mihai Milea stated that:

"IG saw an increase in their APAC region, which is the case of all global brokerages that also have an Australian entity. They have been moving clients from EU to their AU entities because in Australia there are no ESMA regulations related to leverage. Still, it's a strong subject to comment on the decline of FX trading in the EU, since ESMA had a very negative impact on the industry in EU."

A research was made by Finance Magnates Intelligence department for the Win-Loss ratios of the clients' percentage, which included a total of 30 Forex brokers in its sample. The data shows that most of the traders' losses in FX trades. Clients of AETOS, GBE Brokers, e-Toro, Darwinex, and XM Markets has been at the top position in making profits. Among these, AETOS was at the top with 36.3% percent of their clients have made money. 

Moreover, Vestle, HYCM, and EasyMarkets have an unusually high percentage of customers which are in the red.

Think we missed something? Let us know in the comments section below.

IG Group ESMA
The views and opinions expressed in this article are solely those of the author and do not reflect the official policy or position of AtoZMarkets.com, nor should they be attributed to AtoZMarkets.

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