Fouad, please can you tell us a little more about how IG’s institutional services are positioned within the wider structure of the firm and its global footprint?
In May 2019, IG announced our new strategy and three-year growth plan. We set out medium-term targets to achieve an average annual growth rate of 3–5% per annum in our well established Core Markets, and to expand our business by an additional £100 million of revenue through a portfolio of growth initiatives – described in our strategy as Significant Opportunities – by the 2022 financial year. IG’s Institutional business is part of its Significant Opportunities portfolio and targets the c.8000 hedge funds and family offices with less than $US200 million in Assets Under Management. This market segment represents a potential market opportunity of around £500 million for IG.
What do your own day to day responsibilities usually involve and what do you particularly like about your job?
I mostly enjoy the people and the environment we work in. I have been with IG for almost 15 years and have always found it to be a pleasant yet ambitions work environment. As a firm, IG always has innovation and its clients at the forefront of its decision making. Personally, I have very strong management teams across IG Bank and IG Prime which permits me to allocate my time to bespoke projects I deem most important for either business units. Lately, the Institutional roadmap and growth strategy has clearly been one of my main “day to day” activities.
Please remind us about the make up of your institutional customer base and the different client sectors that you now cater for.
We give hedge funds (start up and established ones), proprietary shops, private investment vehicles, and family offices access to a range of synthetic, custody, trading and financing solutions. We recognise that all clients have their own needs, and we provide a service built for their business. But our core approach is the same and our strategy is simple: we focus on working in partnership with our clients, using our strength and resources to help them achieve more.
What range of platforms, connectivity and other institutional services is IG Prime able to provide?
We provide web-based trading, mobile apps, and our own proprietary execution systems. We also support third-party trading access via FIX, MT4, API and Bloomberg EMSX. Our sophisticated APIs deliver trading with the full range of native exchange order types and synthetic orders, as well as access to Tier 1 bank algo trading suites.
Who are the other key people in your institutional team and what roles are they each playing within the business?
Gary Tibbs, COO of IG Prime, has been with the institutional team since the very beginning. In those early days of institutional services for IG, Gary worked closely with the team to come up with solutions to meet client requirements. He also headed up the equities desk for 20 years before moving into his current role.
Max Hayden, Global Head of Prime Brokerage Sales at IG Prime, has over 30 years of experience in the prime brokerage field. He recently joined IG from ITI Capital where he was CEO and prior to that Max was MD of PB at BCS Global Markets, a Russian-based specialist broker. For the majority of his career, Max was at BAML where he performed a number of leadership roles in Prime Brokerage and Equity Financing.
Prime Brokerage has become a hugely competitive industry. What key advantages does IG Prime have in this marketplace?
IG has a long history of being a technology-first company, which sets us apart from competition.
Current and potential partners recognise IG’s market-leading technology, our expertise in delivering innovative new products, and our ability to seamlessly make markets that can be traded 24 hours a day. We provide access to the financial markets that enables our clients to take advantage of opportunities. We can only do this if our platform is stable, secure and reliable, and trade execution is seamless. So the reliability of our technology is paramount.
Today we are an established FTSE 250 company with a strong balance sheet, and a market cap of £2.8 billion. We handle around 7.7 million transactions globally each month enabling clients to benefit from our liquidity and our strong relationships with Tier 1 banks worldwide.
IG has been active in the prime brokerage space since 2006 but has now brought its suite of services together under the banner of IG Prime. Who are you targeting with this service and how bespoke are you able to make it?
Historically IG has focused on B2B2C segments via white labels, API’s, IB and omnibus agreements. The firm has a 45-year pedigree of delivering cutting-edge technology and innovation combined with world-class client service. Today we are building out our prime brokerage capabilities to focus on a bespoke market segment – hedge funds and family offices. IG Prime will be a more defined business providing genuine product innovation and evolution of service on a more formal basis to hedge funds and what they do. We now have a global institutional team, that can cater to the various needs of our clients in a better way than ever before.
In what ways does IG Prime help to deliver increased efficiencies for clients and reduce the costs that many firms are increasingly sensitive about?
IG Prime will deliver efficiency for clients through its use of cutting-edge technology and product development. We can successfully compete because we will be cost effective, whilst still offering clients deep and sophisticated product access with a personal touch. There is demand for a well-capitalised business with a strong suite of prime products. Clients want a real dialogue on their needs rather than a complete focus on the lowest price and IG Prime tailors its solutions to those needs while allowing them to easily plug into our systems.
IG has a long history in CFD trading. In what ways has that helped the firm to develop and deliver institutional services that differentiate it from many other firms in this space?
IG’s success is predicated on investing in and developing technology and innovative products that are market-leading and empowering for clients. We were the first company in our sector to launch an online dealing platform, in 1998, and the first to launch a mobile app with live price streaming, in 2003. We first offered a CFD on bitcoin in 2013, and we launched an exchange traded derivatives platform, Spectrum, in 2019. We regularly invest in developing new tools and features for our client-facing platforms – a continuous process that is directed by detailed research into clients’ evolving needs and that has transitioned into our institutional product offering as well.
Our platforms support OTC trading, share dealing, online wealth management, a CFTC-regulated exchange and a pan-European MTF – giving us plenty of scope to expand our offering. Our products are designed to meet the requirements of each market while leveraging our centralised expertise; they are manufactured centrally and packaged locally.
IG’s historic strength has been in its multi-asset product range. How has that helped you to attract a wider audience of clients?
We understand the vital importance of being able to trade wherever there is an opportunity. Our global reach enables our clients to execute across the world’s financial markets. These include a wide range of asset classes (17,000 markets), synthetic access to 24/5 pricing on the world’s major indices, FX pairs and commodities, plus extended trading hours on US equity markets. Greater choice ensures greater opportunity to recruit and retain a wider audience of clients.
IG has also been making substantial investment in its infrastructure and API connectivity. What benefits is this now delivering to your clients?
Our tech estate is designed to be scalable, stable, reliable and flexible, delivering innovation at speed and in a cost-effective manner. Recent deliverables include an MTF and issuer, turbos, knock-outs, IG Europe and a US RFED.
IG has always treated its banks and brokers as partners. Do you think the increased use of technology and electronification across the financial markets will strengthen those relationships in the future or put pressure on them?
With increased use of technology and electronification, the relationships can only strengthen between us and our partners as we enhance the links and connections with our partners. Technology has always been at the core of IG and we value the possibilities it gives us, our clients and our partners.
Do you see increasing regulation in the financial trading industry as an opportunity or threat to IG’s institutional business?
We’ve a long-standing tradition of innovation, as we address the evolving needs and interests of our sophisticated clients. As a responsible company, we regularly engage with regulators globally to stay aligned as these authorities adapt to the changing needs of their markets. We’ve navigated well when regulations have changed in the past, and believe we have the depth and breadth to continue to do so as markets evolve.
IG’s balance sheet is one of the strongest in the market outside the Tier 1 banks. How important is that in helping you to develop a more sustainable institutional business model?
In FY20 we had £649.2m in revenues and £287.9m in net own funds generated from operations. In FY21 our H1 net trading revenue was up 67%. Our strong balance sheet is one of the key differentiators for us in the prime brokerage space. We are able to distinguish ourselves from other primes as they would not be able to offer such relationships with Tier 1 banks or balance sheets.
The current COVID-19 crisis seems to have impacted trading firms in many different ways. How did IG’s institutional business perform during the early days of the disruption caused by the pandemic and how resilient has it been since then?
Significant investment in our people, communications and technology meant that during lockdown our global teams seamlessly transitioned to home working and still felt connected to IG’s vibrant global community. Our resilient technology and people have meant that IG has provided a near seamless client experience throughout the crisis and has responded to significant levels of client activity.
What further development of your institutional offerings can we expect to see over the coming months?
From an institutional perspective, it really is a blank canvas, and we have a robust roadmap to adapt quickly to the needs of the marketplace. Over the next 24 to 36 months, there will not only be technology advancements and geographic growth from our perspective, but also further announcements such as new product offerings that we envisage launching over the next couple of years. We also have quite a broad set of asset classes that we can extend to our clients given that we’re a synthetic prime.
IG seems to have made delivering institutional services a strategic priority. What are your ambitions for growing this side of your business over the next few years?
Clients are calling for an innovative and competitive alternative to the incumbent providers in the PB space. There is demand for a well-capitalised business with a global reach and strong suite of Prime products. To meet these requirements IG Prime will deliver efficiency for clients through cutting-edge technology and product development.