IG relaxed on possible Japanese rule changes

LONDON (SHARECAST) – Spread betting firm IG Group said it expects the Financial Services Agency of Japan to clarify its intentions regarding limiting the amount of gearing that can be offered to retail foreign exchange speculators in Japan.

In response to recent speculation in the Japanese press, IG said it has made representations, in conjunction with other retail foreign exchange (forex) providers, to the Financial Services Agency of Japan (FSAJ) about the FSAJ’s plans.

IG expects that the FSAJ will shortly either start a period of consultation with the retail forex industry in relation to proposed regulatory changes, or will publish draft rules and then enter into a period of consultation.

IG’s view is that the rule changes that are being contemplated would probably only affect a minority of the group’s Japanese clients, measured both by number of clients and by trading volume. The financial impact is therefore likely to be limited, especially as IG’s Japanese subsidiary already offers standard gearing levels that are much lower than some competitors.

FXO, acquired for £112m last October, at present accounts for about 10 per cent of IG’s group revenue. Tim Howkins, chief executive of IG Group, said in a conference call with analysts that the proposed regulatory change – which could see the amount of leverage used by retail forex traders capped at 25 times, compared with IG’s limit of 100 times – would affect 40 per cent of its trading volumes in the country.

Thoughts: Japan is the world’s second-largest retail foreign exchange market and in 2007 legislated to permit the trading of contracts for differences – a key product offering for IG. Any new rules limiting the use of leverage is likely to result in slower growth in Japan but IG remains a solid dynamic company with competent management and a strong root in the global CFD and spread betting markets. The IG Index site has also been given a revamped look and in fact IG is the only provider I know of that offers both direct market access and a market maker platform on a single web-based trading platform at IG Markets