September 20, 2018 / 6:43 AM / 2 months ago

UPDATE 2-Financial betting clampdown hits IG Group revenue

* Quarterly revenue drops 4.7 pct on lower client activity

* Some retail clients seeking to reclassify as professional

* IG shares drop as much as 10 pct

By Muvija M and Arathy S Nair

Sept 20 (Reuters) - Shares in trading platform IG Group Holdings Plc slid after its revenue dropped 4.7 percent over the last three months, hit by a dip in market volatility and a regulatory clampdown on high-risk betting on financial markets.

Already facing Brexit uncertainties, IG and other London-based online trading firms have been under scrutiny as global regulators tighten rules on products which allowed anyone with a bank card to make highly-leveraged bets on financial markets on their apps and online platforms.

The company reported a drop of 13 percent in the number of British clients, and a 10 percent fall in Europe, Middle East and Africa. Its shares fell as much as 10 percent and traded 6.7 percent lower at 806 pence at 0915 GMT.

The European Union’s securities watchdog, ESMA, last month renewed a ban on the sale of ‘binary’ options to retail customers and IG showed the volume of trading by retail clients in Britain and the EU fell significantly in August.

Analysts were disappointed by the progress the company has made in recategorising customers as educated professionals who are allowed more freedom to trade.

“There certainly was an increase in applications for people to elect to be a professional in the immediate run-up to the rules becoming effective and we continue to see a steady stream of applications,” Chief Executive Officer Peter Hetherington told a call.

Thousands of retail investors had little protection in place and lost large sums in the surge in the Swiss franc four years ago, generating a swathe of legal claims.

IG said the proportion of UK and EU revenue generated by clients who at the end of the period were categorised as professional was over 50 percent in its first quarter to the end of August, in line with the company’s expectations.

The company stuck to its guidance that the ESMA measures would hit historic revenue by about 10 percent, saying it was not possible to draw firm conclusions from a one month period.

GERMAN PLAN

The London-based company, which started off as a spread-betting firm in 1974 with just three employees, said its German unit had received a licence from regulators to offer financial services to EU clients.

It announced plans to create a subsidiary in Dusseldorf in January, which will combine its existing German sales office with key management and control positions, and become IG’s regional hub for its EU business.

Just last month, Israel-based online trading platform Plus500 reported roughly tripling first-half core earnings but warned that the “exceptional performance” was unlikely to be repeated due to the regulatory crackdown.

Revenue at IG fell to 128.9 million pounds ($169.5 million) for the three months ended Aug. 31, from 135.2 million pounds in the year-earlier period. ($1 = 0.7606 pounds) (Reporting by Muvija M and Arathy S Nair in Bengaluru; Editing by Patrick Graham and Keith Weir)

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