IG Revenue Warning Puts Broker Hedging And Risk Retention In Focus

IG Group has cut its 2026 revenue growth outlook after weaker revenue retention in its over-the-counter derivatives business outweighed growth in customer activity, putting the economics of its revised market-making approach in focus.

In its trading update on 2 October, IG said OTC customer income increased by approximately 8% in the three months to 30 September. However, OTC net trading revenue is expected to fall around 18% to £155 million. Across the group, organic first trades increased by more than 25%, while organic active customers rose approximately 17%.

Customer income is what clients pay in spreads, commissions and overnight funding; net trading revenue is what IG keeps once hedging costs and the profit or loss on the client exposure it holds unhedged are taken into account. Growth in the first alongside a fall in the second indicates that the Q3 shortfall came from IG's own risk book, not from weaker client demand. Customer acquisition and activity continued to grow, while the conversion of OTC customer income into net trading revenue weakened.

Group revenue for the quarter is expected to be approximately £240 million, down 14% from £280.1 million a year earlier. Net trading revenue is forecast at around £210 million, against £249.5 million. IG now expects full-year revenue growth in the mid-single digits, down from its previous forecast of 10–15%.

The warning triggered a sharp repricing of the shares, which fell as much as 27.2% during trading on Friday 2 October.

Breon Corcoran, Chief Executive Officer of IG Group, said:

“Growth in first trades and active customers remained strong in Q3 2026. Lower Q3 revenue reflected reduced OTC revenue retention in less supportive market conditions, and I remain confident in meeting our medium-term guidance.”

OTC revenue retention was approximately 70% in the quarter, below the roughly 80% average IG reported for the period since it introduced market-making optimisation measures in the second half of 2025. The ratio measures how much OTC customer income is converted into net trading revenue.

IG maintained that the measures should improve retention over the medium to long term, while acknowledging greater variability over shorter periods. That qualification has become more consequential following a quarter in which weaker retention was sufficient to reduce the group’s annual growth outlook.

The changes have involved specific adjustments to how IG prices and manages its trading business. In its FY25 results presentation, the group outlined measures to adjust OTC spreads in response to underlying liquidity, increase market-risk limits for its most liquid instruments and improve algorithms to reduce hedging costs.

Those disclosures point to a trade-off familiar to broker dealing desks: reducing hedging costs and retaining more income can improve average returns, while allowing greater variation in short-term trading outcomes. Stronger customer activity alone does not ensure higher net trading revenue.

The October update did not provide an asset-class breakdown of the retention shortfall or identify gold as a cause. It also did not disclose enough detail to attribute the weakness to a particular unhedged position. The available evidence supports scrutiny of IG’s market-making and hedging approach, while leaving the specific drivers of the quarter’s outcome unresolved.

The warning follows an earlier sell-off at the end of July, when investors assessed IG’s proposed acquisition of US sports-betting and prediction-markets business Underdog for up to USD 1.3 billion. Shares fell around 10.7% during trading on 31 July, according to Proactive. IG subsequently confirmed that its £125 million share-buyback programme had been cancelled following the acquisition announcement.

The two episodes put different aspects of the business under investor scrutiny: the capital commitment and strategic direction associated with Underdog, followed by the variability of revenue in the established OTC business.

IG reported stronger trading at its acquisition target in the October update. Underdog’s third-quarter net revenue more than doubled year-on-year to approximately USD 105 million. The fourth quarter accounted for more than a third of Underdog’s revenue in 2025. The acquisition remained subject to completion.

Elsewhere in the listed brokerage sector, multi-asset trading group Plus500 issued a separate statement on 2 October confirming that it continued to trade in line with market expectations for 2026 and maintained a strong cash position.

Plus500 also highlighted the performance of its proprietary risk-management framework through different market cycles. Its statement provided a separate company assessment of trading conditions at a time when IG’s update had drawn attention to the resilience of broker revenues. Plus500 will publish its full third-quarter update later this month.

On the same day, multi-asset financial services group CMC Markets announced that Founder and Chief Executive Officer Lord Peter Cruddas had purchased 23,011 shares for approximately £139,000. He also indicated an intention to make purchases worth up to £5 million in total, including that transaction. Further purchases are subject to dealing clearances, market conditions and regulatory requirements, with no commitment to a particular timetable or amount.

A separate IG disclosure published on 29 September recorded Corcoran’s acquisition of 1,946 shares on 17 September through a dividend reinvestment plan, with a reported aggregate value of £26,133.95. The transaction used reinvested dividend proceeds.

Alongside the revenue revision, IG expects approximately £30 million of non-recurring costs in 2026 relating to its proposed redomicile to Jersey and organisational restructuring. This includes £16.4 million reported in the first half. Excluding those costs and expenses associated with the Underdog acquisition that are contingent on completion, the group expects an EBITDA margin in the low-40s percentage range.

The board maintained its medium-term guidance beyond 2026, citing investment in products and brand, customer growth and higher OTC revenue retention.

IG is due to host an investor seminar on Underdog on 8 October and provide further detail on third-quarter trading on 22 October, alongside its scheduled strategy update.

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