September 20, 2018 / 6:27 AM / 25 days ago

Financial betting clampdown hits IG Group revenue

(Reuters) - British online financial trading company IG Group Holdings Plc (IGG.L) reported a 4.7 percent drop in revenue in the first quarter, hurt by lower levels of market volatility and client activity.

FILE PHOTO: Dealers work on the IG Group trading floor in London, Britain June 30, 2015. REUTERS/Neil Hall

The company, like other online trading firms Plus500 Ltd (PLUSP.L) and CMC Markets Plc (CMCX.L), has been under scrutiny as global regulators tighten rules on products which allow ordinary retail customers to make high-risk financial bets at high rates of leverage.

The European Union’s securities watchdog, ESMA, last month renewed a ban on the sale of ‘binary’ options to retail customers.

IG Group said that, as expected, the volume of trading by retail clients in the UK and EU was significantly lower in August than in July following the implementation of the ESMA measures.

The number of clients London-based IG has in the United Kingdom fell 13 percent, while its numbers in the Europe, Middle East and Africa were down 10 percent.

The company stuck to its guidance that the ESMA measures would hit historic revenue by about 10 percent, saying it was not possible to draw firm conclusions from a one month period as it will take time for retail clients to adapt to the new rules and change their trading behaviour.

Online trading platforms have been looking to focus on their professional clients and IG launched an online process in November to enable some retail clients who meet the required criteria to apply to become categorised as an elected professional client.

The company said the proportion of UK and EU revenue generated by clients who at the end of the period were categorised as professional was over 50 percent in the first quarter, in line with the company’s expectations.

IG Group also said its German unit received a licence from a German regulator to offer financial services to EU clients in the run up to Brexit.

Revenue fell to 128.9 million pounds for the three months ended Aug. 31, from 135.2 million pounds in the year-earlier period.

Total group clients rose 3 percent to 129,000, helped primarily by growth in share dealing and investment clients.

($1 = 0.7606 pounds)

Reporting by Muvija M and Arathy S Nair in Bengaluru; Editing by Amrutha Gayathri and Patrick Graham

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