January 23, 2018 / 8:07 AM / a month ago

UPDATE 1-Online broker IG plans German subsidiary, reports higher H1 profit

(Adds details, CEO quote, share moves)

Jan 23 (Reuters) - IG Group Holdings Plc, a British online financial trading company, said on Tuesday it plans to create a subsidiary in Dusseldorf, in response to Britain’s decision to leave the European Union.

The company said it had applied to BaFIN, the German regulator, to establish the subsidiary, which will combine its existing German sales office with key management and control positions, and become IG’s regional hub for its EU business.

The establishment of this subsidiary will not impact IG’s operations, it said.

The company also reported a 29 percent rise in pretax profit for the first half ended Nov. 30 to 136.2 million pounds ($190 million), and said it had taken action to offset the potential financial impact of regulatory changes.

IG, which was founded in 1974 as the world’s first spread-betting firm, said net trading revenue rose 10 percent to 268.4 million pounds.

Shares were up 3 percent at 807 pence in early trade, among the top gainers on the FTSE midcap index.

The company, which provides online stockbroking and trading services to retail investors, also said it had developed new products and services and expanded to new geographies.

This is to broaden its client base and to “continue to market OTC leveraged derivatives to potential new clients,” it said.

“...the most effective measure to improve client outcomes is to ensure that the product is only marketed to the right people in the right way ... current ESMA (European Securities and Markets Authority) proposals might not achieve this,” Chief Executive Peter Hetherington said.

“The disproportionate focus on leverage has caused consternation amongst our large number of retail clients, many of whom have traded for years and wish to continue using our product as they do today,” he said.

The European Union’s markets watchdog started a public consultation on its anticipated plans to restrict the sale of contracts for differences (CFDs) and binary options by spreadbetting companies this month.

CFDs allow people to bet on moves in share prices without having to buy the underlying stock.

ESMA flagged the plans last month, sending shares of spreadbetting firms tumbling.

Britain’s markets regulator, the Financial Conduct Authority, also warned earlier this month about the serious risk of harm from CFDs.

($1 = 0.7160 pounds)

Reporting by Noor Zainab Hussain in Bengaluru; Editing by Saumyadeb Chakrabarty and Biju Dwarakanath

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