Exclusive: IG Group sets up offshore entity in Bermuda
FNG Exclusive… FNG has learned that industry leading online broker IG Group has set up an offshore entity, in Bermuda. The new entity, aptly named IG International Limited, received a license from the Bermuda Monetary Authority (BMA) earlier this year and has already been operating for several months. It will focus on accepting ”rest of world” clients for IG – that is, clients from jurisdictions and countries where IG does not have an existing licensed operation. That would include areas such as Central and South America, and certain regions in Africa and the Far East.
The BMA license is a “Class F” license, allowing IG International to operate as a digital asset derivative exchange provider. IG International is permitted to deal in investments, arrange deals in investments, and safeguard and administer investments, but is not permitted to manage investments or provide investment advice.
FNG spoke with an official IG spokesperson on the matter, who told us:
“Our investment for growth in IG International means we are better positioned to capture further international client demand and simplifies the interactions of our existing international clients with IG. The opening of our international entity in Bermuda in March of this year has reduced our operational risk and seamlessly delivered the world-class trading experience all our clients expect.”
The move by IG is one we have seen by other brokers such as VantageFX, GO Markets, and Equiti Group, setting up co- or differently-branded offshore entities for rest-of-world clients. As regulators in the US, Japan, the UK, the EU and most recently Australia have moved to place restrictive conditions on FX and CFD trading – leverage limits, required negative balance protection, outlawing deposit bonus payments, increased capital requirements – brokers which used to take rest-of-world clients onshore into their home base licensed entities are now switching to keeping them offshore, where they can still offer clients more lenient trading conditions. This also enables the “regulated” brokers such as IG to compete for rest-of-world clients with fully offshore brokers.
We understand that IG chose Bermuda for a number of reasons. First, IG apparently wanted to bring all its international clients into a single entity under one regulator to reduce operational risk.
Bermuda is different from most other “offshore” island nations in that it is recognized as having a strong regulatory framework for financial institutions through the BMA. Bermuda already regulates some of the world’s largest insurance companies and some other financial service providers, for example the international entities of AXA, Fidelity International, Allianz, AON, CHUBB, AIG, Marsh, and HSBC. A number of new-age cryptocurrency exchanges have also chosen to domicile in Bermuda for similar reasons, including CrossTower and FastMatch founder Dmitri Galinov’s 24 Exchange.
And, location-wise Bermuda’s time zone is close to those of most of Central and South America, one of the key targets for IG International.
We understand that IG International doesn’t offer products or services, either to residents of the UK or any EU country, or residents of countries where IG already has a local presence. It also doesn’t offer services to on-island residents of Bermuda.