Spread betting and contracts for difference specialist IG (IGG) is struggling with new regulations after saying the volume in trading by retail clients in the UK and EU was ‘significantly lower’ in August.
Sales in the three months to 31 August fell 5% to £128.9m with lower volatility in financial markets resulting in reduced client activity compared with its last financial year.
The shares have fallen 8.4% to 791p as investors worried lower trading activity could continue after the implementation of new measures by the European Securities and Markets Authority.
In a previous announcement, IG revealed it expected regulation to hit revenue by approximately 10% and this guidance has not changed following the disappointing performance in August.
Outside of retail client trading, the proportion of sales by professional clients in the UK and EU were over 50% in the first financial quarter of 2019, which was in line with expectations.
Shore Capital’s Paul McGinnis argues IG’s valuation is ‘overstretched’ and investors underestimate the determination of regulators to clampdown on activity that leads to poor outcomes for the majority of retail investors.
One of the biggest criticisms of CFDs is that people don’t fully understand how they work, hence why there has been increased intervention to protect individuals.
