IG Group makes £728m swoop for US broker Tastytrade in bid to crack the American market
IG Group is hoping to crack the US market with a $1billion (£728million) takeover of rival Tastytrade.
The investment firm said that the ‘landmark’ deal would allow it access to the world’s largest listed derivatives markets.
Derivatives are complex financial instruments, which allow investors to bet on the price of an asset such as a share or currency going up or down.
American dreams: Investment firm IG hopes a £728m takeover of rival Tastytrade would allow it access to the world’s largest listed derivatives markets
They also allow investors effectively to borrow to increase the size of their trade, meaning both wins and losses can be hugely magnified.
The deal will have no effect on IG’s UK customers, as Tastytrade is used by US investors trading derivatives on US exchanges.
But in the long-term, Tastytrade hopes to use IG’s infrastructure to expand globally.
IG chief executive June Felix was also keen to point out that ‘this is not Robinhood’, referring to the US trading app which has drawn sharp criticism for targeting young investors.
She said the average derivatives trader in the US is 50, with a significant amount of wealth.
But the deal will make millions for Tastytrade’s shareholders.
IG is paying £219million in cash for the company, which will be split between backers.
The rest will be paid in 61m IG shares, giving Tastytrade’s management a combined 5.7 per cent stake in the newly merged company.
There are an estimated 1.5m individual investors who trade US derivatives, and Tastytrade has more than 105,000 active accounts.
It also teaches inexperienced investors about trading.