Finance Magnates learned on Thursday that Forest Park FX (FP) has become IG Group's first introducing broker in the US. The London-based trading firm launched its US operations yesterday, becoming the first new entrant to the American market in several years.
“Entering the US Forex market represents a great opportunity for IG," said IG US CEO Rupert Osborne. "In addition to our own marketing outreach, we wanted to work with top introducing brokers to both spread the word about our offering. Given Forest Park FX’s reputation for adding value to clients and our prior experience with them in Europe, they were always at the top of our list."
Working alongside the broker, FP will be providing its clients with market access through IG, cash back rebates for retail traders that use its services, trading algorithms, support for money managers and Liquidity solutions to hedge funds.
Speaking to Finance Magnates, FP's CEO, Justin Hertzberg, gave some indications as to what the retail trading market looks like in the US and why IG might be attracted to it.
"In the wake of ESMA, I think we will see more European-based brokers considering the US market for new, regulated operations given the potential upside," said Herzberg. "Over the long-term, I think we'll see a general conversion toward multi-asset brokers with regulation falling in line."
High client value, low competition for IG US
A move to the US will be driven, according to Hertzberg, by a lack of competition and, despite regulatory strictures, a desire to trade on the part of many Americans. For brokers, another push factor is the high-value clients that the US offers.
"Despite regulatory changes brought on by the Dodd-Frank bill and the subsequent contraction of the industry, the US market has remained one of the largest and most sophisticated audiences in the world," said Hertzberg. "The barrier to entry as an RFED is high with the net capital and regulatory obligations, but the business is there. I believe the average US account size is around $6,000. For [our] clients, it is around $11,000."
IG's expansion into the US is likely to be helped by its acquisition of FX news and research portal, FXDaily, which it bought from FXCM in late 2016. Having paid $40 million for the site, it makes sense that the broker is now trying to use it to attract new clients.
And for those traders, IG will be a welcome addition to the market. As noted, it's been some years since a broker entered the US retail trading market and many traders have ended up with firms that they didn't necessarily want to be clients of.
"[IG] are entering a market where so many of the clients active with Gain Capital and Oanda didn’t actually start their trading accounts there, but ended up with an account at these brokers by virtue of various and cascading mergers, acquisitions and/or sales," said Hertzberg. "For the first time in many years, clients have a new option in IG – and one that is a strong brand, with experience servicing retail FX traders and tried and tested trading platforms and customer portals."
