Private punters are logging on in their thousands to play the stock market and foreign exchanges with City bookmakers.
IG Index, the City’s oldest spread-betting firm, has reported that the pick-up in market fortunes since the big crash of 2008 is prompting new clients to sign up to the firm at the rate of 3,000 a month.
Tim Howkins, the chief executive of IG Group, said: “A lot of people left the market after taking a hit, especially trading banking and financial stocks, during the huge volatility of September and October 2008 after the collapse of Lehman Brothers.
“However, many came back in early 2009 as the market started rising again and currently we are signing up new UK customers at a rate of around 700 a week. Our new clients are very similar in general profile to our existing client base.”
IG argues that, contrary to popular belief, its punters are not people working in the City making a bit on the side on their own account. “Compliance rules in the banking industry make it very difficult for City people to trade with us,” Mr Howkins said, “and while, yes, there have been a lot of redundancies in the City over the last year, I would say that, of the hundreds signing up to us every week, only five or ten are ex-City people.”
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IG said that its punters represented professional Middle England. Typically male — only 10 per cent of IG accounts in the UK are held by women — their average age is 37. They tend to be individuals earning more than £40,000 a year and are likely to be professionals, such as accountants, doctors and dentists, are in corporate middle management or are self-employed. Most, according to IG, use spread-betting as an extra tool in their investment portfolio.
Many trade CFDs, the instruments that allow individuals to trade shares without actually owning them. IG clients, the company said, were equally adept at “shorting” or “going long” on stock — betting either that shares would fall or rise, akin to selling or buying a share for short-term gain.Increasingly, they are also trading currencies, indices and commodities.
However, IG has not been making as much money out of its British client base of 40,000 active punters as it would like. Over the past year many of the high rollers — the likes of Mike Ashley, the retail billionaire and owner of Newcastle United Football Club, who is said to trade with IG — have reduced their activity. IG is making on average about £2,000 per client over a six-month period, down on what it was yielding during the volatility of the financial crisis.
Its profit margins have improved and instances of bad debts from punters, who lost their shirts during the downturn, have fallen from a total of £18 million last year to negligible amounts.
The reduction of bad debt and growth in new markets, including Australia and France, led IG yesterday to report profits of £78 million in the six months to November 30, 34 per cent higher than in the comparable period in 2008. That, in turn, has fuelled a 25 per cent increase in the group’s interim dividend to 5p a share.