IG Group, the largest UK provider of financial derivatives such as spread betting, is a company on a remarkable trajectory. Founded in 1974 by prominent Conservative Party donor Stuart Wheeler, IG Index initially allowed clients to bypass strict exchange controls by betting on the price of gold. In 1982, the company expanded to offer bets on the FT30 (the predecessor to the FTSE-100). By the time it introduced spread betting on individual publicly traded shares under its IG Index brand, it was well on its way to becoming a highly profitable enterprise.
Thanks to its innovative approach and effective marketing strategies, IG has established itself as a leader in the financial derivatives market.
IG Index’s Financial Spread Betting Operation
The financial spread betting division allows clients to speculate on a wide range of instruments, including individual stocks, market indices, commodities, interest rates, and currency exchange rates. Here’s how it works: IG quotes a spread based on the underlying live price, such as FTSE 100: 5850 – 5860. Clients place a bet (e.g., £20 per point) and choose between going “long” (profiting if the FTSE rises above 5860) or “short” (gaining if it falls below 5850). For instance, if they bet “long” and the FTSE rises to 5880, they would earn a profit of £400 (£20 x 20 points) before accounting for dealing costs.
Spread betting is particularly attractive because gains are exempt from capital gains tax, and clients can use leverage—borrowing part of the underlying investment while benefiting from the full gain if the bet moves in their favor.
IG generates revenue not only from clients’ losing bets but also from the spreads (which are often wider than those in the underlying market) and by retaining interest on client deposits. Unlike traditional casino operators, IG avoids significant losses from high-stakes clients by hedging its exposure through trading in underlying securities or related instruments. This effective risk management has consistently contributed to the company’s strong profitability.
How IG Became a Leader in Financial Trading: An Inside Look
IG is known as a spread-betting company in the UK, but in most of the rest of the world its main product is contracts for difference. The differences are largely technical but in Britain the former attracts no capital gains tax because it is classed as gambling, whereas the latter does. This is perhaps because those who trade the financial markets outside the UK tend not to associate taking positions in financial markets with “betting” and so, with no tax advantage to spread betting, that latter dominates.
IG Index’s success has inspired competition from other financial spread betting firms, such as CMC Markets, Cantor Index, and City Index. Despite this, IG has maintained its market-leading position by introducing innovative products like contracts for difference (CFDs), which are similar to spread bets but without fixed expiry dates, as well as sports spread betting and binary betting.
International expansion has also played a key role in IG’s growth. Its first overseas office in Australia has been a success, and the company continues to explore opportunities in other global markets.
Secrets of IG Group: From Humble Beginnings to a Trading Revolution
IG started off 36 years ago just as a UK company, and really for the first 30 years they were principally a UK business. IG started off in 1974 as a way for City workers to trade the gold price – in fact the company was initially namded ‘Investors’ Gold’ but the Bank of England objected to the name on the grounds that it sounded too official. Founded in 1974 by Stuart Wheeler, the company at the time was still one year away from its stock-market flotation. At the time it had around 85 employees and revenues for that year were just £12 million.
In 2000, IG Group listed on the LSE and in the 1998 the company developed the first simplistic dealing interface but this was nothing much more than a chat system replacing phone dealing. A functional online trading platform was launched in 2003 which proved to be the catalyst for exponential growth. In just 3 months after launch, internet trading moving from 15% of IG’s dealing to 85%.
Around 2001, IG Index, the spread betting brand IG Group promotes to clients, had 5000 clients. In 2011 it had well over 100,000 (September 2011). To get an idea of the acceleration of sign-ups David Jones at the time Chief Market Strategist at IG Group, is quoted of saying that ‘from May 2007 in a typical month we opened 1,000 UK accounts: in September 2008 that number was nearer 3,000′. It is interesting to note that in October 2008 a record number of spread betters opened accounts with IG.
IG Index remains one of the leading suppliers of speculative investment products to retail and professional investors here in the United Kingdom, although now they operate in 13 or 14 countries worldwide. In Australia IG have had a presence for over 18 years whilst expanding its footprint into Spain, Germany, France, Singapore, Japan and the United States. Arguably IG Groups’ main rival is CMC Markets, which is number two in the UK and Australia. IG Group acquired FXO for 112m in October 2008 to get a foothold in Japan. However, regulatory restrictions on the amount of leverage allowed has meant that this market has underperformed.
IG’s average customer is a professional male (most clients are male, it is true) aged between 35 and 45 who typically spends about 250 pounds per trade, giving control over about 5,000 pounds worth of shares because of leverage, according to Tim Howkins, who was CEO of IG Index at the time. Most clients are not traders, who are barred from making bets by workplace compliance rules, he said. A typical client would be a well-paid professional or someone who runs their own business. Across the group as a whole, about 30% of IG Index’s revenue comes from individual shares, about 30% from equity indices, about 30% from forex. And then the remainder is mainly commodities, and that tends to be particularly crude oil. Among those who open financial spread betting accounts, up to 30% never trade while another 20% give up in the first month.
IG Group Holdings had over 2,500 employees as of May 31, 2024. IG Group has recently taken occupancy of 87,000 sq ft of gleaming new offices off Cannon Street.
Did you know the “G” in IG Index stands for gold? This reflects the company’s origins, with its first product being an index based on gold prices when financial spread betting was first conceptualized in 1974.
History of IG Index
1974 IG Index founded by Stuart Wheeler to enable UK residents to speculate on the price of gold.
1975 First bets taken in UK.
1976 Betting extended to cover all commodities traded in London.
1979 IG Index takes bets on the movement of American markets for the first time.
1981 Betting available on FTSE and Dow Jones indices following the introduction of stock index futures in America.
1988 IG becomes authorised and regulated in the UK by the AFBD, later absorbed into the SFA, in turn absorbed into the FCA.
1993 Sports spread-betting department established.
1995 First bets taken on individual shares.
1996 Foreign Exchange dealing business started.
1998 IG Index, the granddaddy of the spread-betters, launched its first online trading site in 1998.
1999 Margin Trading on shares using CFDs introduced.
2000 IG Group floats on London Stock Exchange in the Speciality and Other Financial sector. Within IG Group, IG Index offers financial and sports spread betting and IG Markets offers CFDs and Foreign Exchange trading.
2003 New internet dealing platform launched.
