IG is acquiring one of the fastest-growing retail investor businesses in the US futures and options market © Bloomberg

IG Group is to buy US-based online brokerage Tastytrade for $1bn in its largest-ever acquisition, as the British spread-betting company seeks a stronger foothold in the booming retail investor market.

IG is acquiring one of the fastest-growing retail investor businesses in the US futures and options market, while Tastytrade will be able to use IG’s global infrastructure to expand its services internationally.

US options trading volumes have grown significantly and hit record levels last year, according to Jefferies, which advised on the deal. That was in part because of rising numbers of retail investors keen to bet on the volatility in the market.

June Felix, IG chief executive, said the deal would “materially expand and scale our business in the US and see us further diversify into the exciting high-growth market of US retail options and futures”, which boasted more than 1.5m retail traders and was “adjacent to IG’s core retail trading skill set”.

Shares in IG, which is the largest listed spread-betting group in the UK and has a small retail investor business in the US, dropped almost 10 per cent, with analysts at Canaccord Genuity saying the deal price was “very punchy”.

“Investors can also be forgiven for wondering if history is about to repeat itself,” they added. “IGG acquired FXOnline years ago for a full price, only for increased regulation to severely damage profitability. The question of increased regulation in the US retail futures and options market will therefore be at the forefront of investors minds.”

The acquisition comes after a period of record trading for IG in the six months ended November 30.

The pandemic has created fertile conditions for spread betting among day-trading punters often trapped at home with time on their hands and a wildly swinging market to play with.

Net trading revenue rose two-thirds to £416.9m, while profit before tax more than doubled to £231.3m, from £101.2m last year. Active clients rose 55 per cent to 238,600 in the six-month period. 

“We delivered record revenue and profit, made excellent progress against our strategic growth objectives and continued to build a more sustainable and diversified global business,” Ms Felix said.

The company said the deal would be funded with $300m in cash and the issue of 61m IG shares. The transaction reflects a valuation for Tastytrade of about 18 times 2020 earnings before interest, tax, depreciation and amortisation.

Founded in 2011, Chicago-based Tastytrade also provides eight hours of free trading information and advice daily, with 900,000 subscribers across 190 countries accessing its content on platforms including YouTube and iTunes.

Online retail trading platforms are under growing scrutiny in the US. Robinhood, which has attracted large numbers of retail investors to its day trading app, last month agreed to pay $65m to settle charges from securities regulators that it failed to give its customers the best prices for trades on its platform.

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