Good morning, and welcome to our First Half Results presentation. I'm June Felix, Chief Executive Officer of IG Group, and I'm joined by my Chief Financial Officer, Charlie Rozes. I'm delighted to update you on the progress the business has made over what has been a period of outstanding performance. I'll start with my reflections on the last six months and run through our performance highlights. Then I'll hand over to Charlie, who will cover our financial performance in more detail. I'll return to look at the progress we've made across our strategic priorities, and then we'll open up for questions. Today, we are a fundamentally stronger and more diverse business, having significantly evolved our breadth and strategic direction. We have made great strides since we announced our new strategy three years ago.
We're on an exciting journey, and we continue to deliver tangible results in line with our growth strategy and financial targets. At the heart of our business, we are a global fintech, delivering sustainable growth through our multi-product trading platform. We have evolved from a U.K.-centric CFD-focused firm to a global business, strategically and methodically expanding by product and by region, especially in the large and fast-growing markets in Asia and in the U.S. I'd like to highlight, in particular, the tastytrade acquisition, which brought a step change in our reach, products, and engaging educational content. Through this transformation, we've applied a winning formula of combining expert local knowledge with a global scale, resources, content, and expertise. Japan is a strong illustration of this approach, which resulted in outstanding growth.
With the highly engaging content and award-winning capabilities from tastytrade, we're very excited about the future for the group as we build a greater community of well-informed, educated traders globally. Last summer, we launched our new purpose across the group. Together with our fantastic people, this will help deliver sustainable value for our clients, shareholders, and other stakeholders. Turning now to slide five, I'd like to share some highlights from the first half. Unlike others who've had some hard landings, we've demonstrated that we can deliver consistent performance in less volatile market conditions. This is the result of our ability to maintain and nurture a high-value, loyal client base, our reliable risk management model, and our increasingly diversified revenue streams. Our half-year results showcase record revenues, profits, and steady progress on our strategic growth objectives.
This resulted in group net trading revenue up 14% year-on-year, reflecting the addition of tastytrade and the continued strength of the active trading base with global active clients up 42%, including the tastytrade clients. As you would expect, we've seen some moderation in client activity, particularly around first trades, which were down in the period against last year. However, they're still up against the more comparable pre-pandemic level. Looking at tastytrade, which we're including in our reporting for the first time, we've seen an impressive 34% increase in revenue year-on-year. We have seen strong growth in Japan, with revenue up 29%, resulting in our APAC markets now almost equaling in size our U.K. business. This is a great example of how we bring our global knowledge, local expertise to light.
On the right-hand side of the slide are examples of the highly distinctive ways we appeal to the specific local tastes in the U.S. and Japan to achieve these excellent results. As we grow and deepen our footprint, we are ever aware of our duties as a responsible corporate citizen. Our strong performance is underpinned by a clear strategy which also embeds sustainability across the business, and we have taken positive steps on our journey during the period. As you can see from the table on the left, these four pillars underpin how we incorporate sustainability into the way we look at products, people, partnerships, and best practice. Today, I'd like to focus on just one aspect, financial education, where as a financial institution, we believe we have unique skills, and this is therefore an area we can really make a difference.
For our clients, this means providing them with a range of research, analysis, and educational resources, together with tools for them to execute their trading strategies. But our educational goals go beyond our clients. We are committed to improving financial literacy in society generally. To this end, I want to highlight our recent announcement pledging 1% of annual post-tax profits for community outreach. We're putting an emphasis on education through Teach First and the global network of Teach For All. My colleagues and I are immensely proud of this. Before I hand over to Charlie, let me just reiterate that IG is an exciting high-growth business, and we deliver on our promises. During the first half of this year. We delivered strong performance.
We achieved excellent growth in tastytrade, and we are on track to meet our ambitious medium-term targets. We continue to create, attract, and retain the most sophisticated, experienced, and high-value clients around the world, and that, in turn, drives our growing base of recurring revenue. We are guided by a clear purpose, and ESG is fully embedded, ensuring our high growth and business are sustainable, and we have multiple engines for growth over the near and longer term. Let me now pass you over to Charlie to run through the first half results.
Thank you, June, and good morning, everyone. I'll now take you through the financial results for the first half of the year. I'm pleased to present another strong set of results for IG. Furthermore, this is the first set of interim results to include tastytrade, and we're very pleased with the performance delivered since the deal was completed several months ago. What I think you'll see today is a new IG starting to emerge, one that is larger and more diverse, expanding into exciting new products and markets. Before I get into the highlights, let me clarify a few points on the presentation of the figures. In December, we announced the proposed sale of Nadex and our investment in the Small Exchange, which we expect to close in Q4.
As explained at the time, the sale delivers a significant return on investment and opens up further capacity to invest and grow our businesses. For this presentation, Nadex is reported as a discontinued operation. Therefore, all the figures shown today are on a continuing operations basis, which exclude Nadex in both the current and historical periods. Additionally, all current year figures are presented on an adjusted basis. This excludes certain non-recurring and non-cash costs in relation to the completion of the tastytrade deal, the pending sale of Nadex, and the balance sheet refinancing completed in November. A reconciliation of non-IFRS performance measures for the first half is presented in the appendix. Now to the financial highlights, s tatutory revenue was GBP 471.9 million.
Excluding the foreign exchange hedging gain associated with the tastytrade financing, adjusted revenue for the first half was GBP 466.1 million, 14% higher than the first half of last year, reflecting the inclusion of five months of tastytrade revenue. Statutory profit before tax was GBP 245.2 million. Excluding certain non-recurring and non-cash costs, which you can see detailed in the appendix, adjusted profit before tax was GBP 258 million, up 13%, and basic earnings per share was 50.6 pence, flat on the prior year, t otal client money balances at the end of the period stood at GBP 4.9 billion, up 88%.
This is a measure of the transformation in the size of the business in the last 12 months, and importantly, should interest rates start to rise, we expect this to generate an important additional income stream, particularly in our U.S. business. These results demonstrate not only the continued strength of our business, but the significantly larger business we've now become with the addition of tastytrade and the step change in the OTC business. The two charts on the right-hand side show our revenue and profit performance over the last three years, again demonstrating the steady expansion of our business and our track record of growth. Finally, on this slide, we'll be paying an interim dividend of GBP 12.96 per share, which is calculated as 30% of the prior year's full year dividend. Now let me turn to the income statement.
The net trading revenue of GBP 466.1 million represented a record half for revenue and a 14% increase on the prior period. Now, if we exclude tastytrade, revenue was still up 1%, a very good performance given the softer market conditions compared to the first half of FY 2021 and driven by the sustained strength of our active client base, which is now materially larger than it was pre-pandemic. Total operating costs, consisting of both operating expense and variable remuneration, increased by 13% to GBP 205.7 million. Again, this reflects the addition of tastytrade and excluding this, operating costs were down 1%. Taking all this together, group profit before tax of GBP 258 million was up 13% and excluding tastytrade, this was still up year-over-year.
Strong revenue performance, along with continued diligent management of costs, delivered an adjusted PBT margin of 55.3%, consistent with the equivalent period in FY 2021 and is noteworthy given the lower market volatility and client activity seen this period. The effective tax rate for the half reduced to 17.4%, lower than previously guided, due to the successful resolution of a foreign tax audit and a review of uncertain tax positions. Moving on to look at revenue performance in more detail. Here we show the revenue, active clients, and revenue per client by product compared with the prior year half.
We've also included a comparison to the first half of FY 2020, which gives us a benchmark to the pre-pandemic period. Market conditions in the first half of this year felt more normal and consequently comparable to the level seen prior to the pandemic in the first half of FY 2020. This is therefore a more appropriate basis for comparison. Here we can see the significant growth in the scale of the business compared with the pre-pandemic period, not only driven by the tastytrade acquisition, but also by the massive step-up in the active client base across the last two years. We've said previously that the enlarged active client base will likely be the enduring legacy of this period across all the IG businesses, and this continues to be the case from what we've seen in the first half.
Through the addition of tastytrade and the successes of stock trading and Spectrum, we're starting to achieve our objectives to both expand and diversify the revenue mix of the group. OTC leverage revenue continues to represent the majority of group revenue. However, it now only represents 84% of revenue compared with 98% two years ago. The higher growth rates we expect in exchange traded products means that this mix will continue to shift appreciably over the next few years as we change the definition of what IG is. OTC leverage revenue of GBP 392.6 million was up 1% on the prior period and materially higher than the pre-pandemic levels, up 65% from the same period in FY 2020.
In the half, we launched a number of new OTC products, such as U.S., and U.K inflation indices, five new cryptos, a U.K natural gas index, and a Hang Seng TECH Index, among others. Bringing these quickly to market to serve client demand helped underpin the good result in the period. The number of active clients moderated as anticipated, reducing 3% on the prior period. However, they were up 44% on the first half of FY 2020. Exchange traded derivatives revenue was GBP 57.6 million and includes GBP 52.8 million of revenue generated from tastytrade in the period since acquisition. The balance of the ETD revenue came from Spectrum, our European multilateral trading facility. Our stock trading business performed well with revenue increasing 3% on the first half of FY 2021 and up 265% on the FY 2020 pre-pandemic period.
Active clients increased by 30% on last year due to the high levels of client onboarding we experienced in the third quarter of last year. Now focusing on our Core Markets+ segment where we generated revenue of GBP 401 million in the half. We're very pleased with this strong performance, which was above our expectations. In softer market conditions and despite the impact of the new ASIC regulations in Australia, we nonetheless maintain revenue in line with the previous year. In the chart on the top left, the bars show the number of OTC leverage active clients by quarter, and the light blue line shows the average revenue per client.
This chart really demonstrates, again, the step change in the size of our Core Markets active client base that we experienced at the start of the pandemic, and we continue to maintain this larger and high-quality client base six quarters on. Following the brief spike in revenue per client in Q4 of FY 2020, the start of the pandemic, average revenue per client has remained remarkably consistent over the following six quarters and still higher than the pre-pandemic levels. First half revenue per client was 17% higher than the same period in FY 2020. As guided previously, we've seen some moderation in client activity as markets became less volatile, and this has been evident in new client acquisition, which reduced from the substantially elevated levels in Q4 of FY 2020 and throughout FY 2021.
However, our rate of new client acquisition remains materially higher than it was before the start of the pandemic, with first trades in the half 28% higher than the same period in FY 2020 and were consistent across Q1 and Q2 of this year. Even within our Core Markets+ segment, we have a broad and geographically diverse revenue base. This pie chart shows the breakdown of the OTC Core Markets+ revenue by geography. As you can see, our fast-growing Asia Pacific region is now nearly the same size as the U.K. and Ireland, with Japan contributing 12% of the total portfolio. I now want to take a few moments to focus on a few of our principal Core Markets+ geographies to show the different trends within these market segments. First, the U.K. and Europe.
Here in our more established businesses, we've seen some moderation in client activity, particularly from the highs of last year. However, the U.K. and EU now represents a significantly larger business than it was just two years ago. Revenue is 66% higher than the same period in FY 2020, and active clients are up 33%. We have a large, loyal and valuable client base, and we're well-positioned to grow it from this point. Now, we couldn't cover the core markets without highlighting the exceptional performance in Japan, which continues to go from strength to strength, reporting a 29% increase in revenue half on half and a remarkable 400% increase in revenue since the first half of FY 2019.
Active clients increased 59% on last year with a continued growth in the client base driven by localization of content, products, and user experience, as well as highly successful marketing programs. Australia reported GBP 45 million of revenue in the half, which included a full six months of the new ASIC regulations, which were introduced at the end of March 2021. We were well prepared to navigate these changes and fully expect to see a resumption of revenue growth similar to what we saw in the U.K. and EU following the introduction of ESMA regulations a few years ago. As an early proof point of this, Australia Q2 revenue this year was 17% higher than Q1, as client trading appears to have adjusted to the new local regulations. Turning now to our high potential market segment, which is presented for continuing operations only, excluding Nadex.
As previously guided, our target on the high potential markets is to grow revenue 25%-30% per year over the medium term. To enable appropriate comparisons to last year, we presented this segment on a pro forma basis, where we've included the five months of tastytrade revenue from the prior year. On this basis, the revenue from the high potential portfolio increased by 30%. tastytrade recorded pro forma revenue growth of 34% on a constant currency basis or 29% on a headline basis in sterling. This represents delivery of another two consecutive quarters of revenue growth. Active clients increased by 21%, reflecting the significant growth in the client base in the prior half. We believe that the quality of the tastytrade revenue is also noteworthy. Let me give just one example of that.
The very low concentration of single name equities traded in the half showed no overdependence on one or two popular names often seen in the press and social media. In fact, the top 25 equities traded by tasty clients only represented 40% of the total trades in the period. June will share some more tasty highlights with you in a moment. Our leveraged FX business in the U.S. delivered revenue of GBP 7.5 million, 43% higher, driven by an increase in the average revenue per client as the client base continues to mature. At Spectrum, we continue to build and develop the client base, increasing active clients by 50% on the prior period, and we have a promising pipeline of additional brokers and market makers to come. Now on to operating costs.
As a reminder, these are presented on a continuing operations basis and excludes certain non-recurring costs and non-cash costs in relation to the tastytrade acquisition, the pending sale of Nadex and Small Exchange, and the balance sheet refinancing. Total operating costs increased by 13%, entirely reflecting the addition of tastytrade. Excluding tastytrade, operating costs were down 1%, with a 7% reduction in variable remuneration and operating expenses flat on the first half of last year. The underlying operating expense movement was affected by two factors. First, higher one-off costs last year, which were related to higher accruals for holiday pay and some redundancy and restructuring costs. Second, in the current period, there was a translational FX benefit from the strengthening of sterling. Looking out over the balance of the year, we expect to see increases in the cost base in the second half.
We continue to invest in the growth of the business, particularly through increased marketing and in the scalability and resilience of our client trading platforms. For FY 2022, this investment has been planned to be weighted towards the second half of the year. Despite this phasing and timing difference within the year, we continue to manage our cost base carefully and within guidance. As a reminder, we said full year total operating costs would increase by around 4% on the combined IG and tastytrade FY 2021 cost base, which allowed for inflationary increases and further investments in technology, but offset by a reduction in variable remuneration and revenue-related costs, in line with the anticipated moderation in client demand and trading activity.
Given the performance in this half has been above our expectations, we now expect a higher variable remuneration charge, which for the full year should be above the FY 2021 charge, allowing for year-over-year growth in group headcount. As a result, we now expect our total operating costs to increase by around 7% on the FY 2021 combined cost base. With the exception of the higher variable remuneration tied to performance, all other costs are being managed in line with the previous guidance. In the period, we've also taken important steps to firmly position ourselves for future growth by increasing our financial capacity and flexibility through a very successful inaugural public debt issuance and the renegotiation of our revolving credit facility. In November, we issued GBP 300 million of seven-year senior unsecured bonds. The offer attracted strong investor demand as the order book was nearly 3 x oversubscribed.
This enabled us to achieve a competitive price level for the bonds. These funds were primarily used to repay our GBP 250 million short-dated term loan, which has now allowed us to extend the maturity profile of our external funding. We also renegotiated and increased the size of our revolving credit facility. We increased the size of the facility from GBP 100 million- GBP 300 million, with an option to increase it further to GBP 400 million if needed, and we extended the term to three- years with an option to add by two further years on request. This substantially increases the group's capacity for standby liquidity to support further growth in the broker margin requirement for the OTC business as it continues to expand.
As a reminder, the tastytrade business is based on an agency model and consequently is very capital and liquidity light and does not require a broker margin as the OTC business does. I should note that the RCF typically remains undrawn as the group's robust free cash flow generation and quick revenue to cash conversion covers all daily liquidity needs. The advantage of the RCF, which is available on demand, is to enable us to support a much larger broker margin and still satisfy regulatory requirements for liquidity. The capital and liquidity positions of the group remain robust and able to handle both elevated levels of client trading as well as the periodic spikes in activity. The group in January adopted the new U.K. regulatory capital framework, the Investment Firms Prudential Regime, or IFPR.
This new framework has not had any detrimental effect to the capital position of the group and in fact is slightly favorable to the previous regime on the current transitional arrangements. As this has now been adopted, we expect to conclude our ongoing work on the group capital planning framework in the second half of this financial year. Finally, before I hand back over to June, I'd like to update on guidance for the remainder of the year and the medium term. In the Core Markets+, we've seen a strong outturn in the half as this business continues to sustain a high level of operating performance. We continue to target revenue growth in this segment in the range of 5%-7% per year over the medium term.
In our high potential markets, where we see strong growth momentum, we're targeting revenue growth of 25%-30% per year over the medium term, with tastytrade at the higher end of this range. For FY 2022, we anticipate that tasty will be within this range, which is down slightly on our previous guidance for this year. This is due to a delay in the Canada launch while our third-party clearing firm completes its preparations. As a result, this is now expected to launch in FY 2023. Looking at the second half of this year, across all of our businesses, the comparison to the prior year will of course be challenging, as that period contained the extraordinary Reddit and GameStop activity, which elevated both trading levels and new client acquisition through that time.
On costs, as I said before, we expect total operating costs to increase by around 7%. With the exception of the higher variable remuneration, all other costs are being managed in line with the previous guidance of 4%. Assuming the pending sale of Nadex and Small Exchange completes in Q4 this year, we would expect the full year tax rate to be around 19% for FY 2022, slightly better than guided previously. We'd, however, expect this to be closer to 20% in FY 2023 and 24% in FY 2024 as the U.K. corporate tax rate increases. Lastly, although still importantly, with the proposed sale of Nadex and our shareholding in the Small Exchange, we anticipate recording an exceptional pre-tax gain of approximately GBP 125 million in the second half.
I should also add that in December, we sold down part of our investment in Zero Hash, a fast-growing crypto infrastructure company, which will lead to an exceptional pre-tax gain of approximately GBP 4 million. We also still retain a minority shareholding in Zero Hash. All of these represent very strong returns on investment. As I said at the outset, we're proud of our strong performance in the half, and these results show that a new and exciting IG is starting to emerge. Thank you very much. With that, I'll hand back over to June to update on our strategic progress.
Thank you, Charlie. If we can move to slide 20, I want to delve deeper on why we are different and so well positioned to grow. Firstly, we have unique client propositions that attract and retain clients. Secondly, we now have a larger and growing total addressable market that presents fantastic opportunities. Thirdly, the acquisition of tastytrade is a step change in our product offering and geographic presence. I'm going to look at each of these areas in more detail over the next few slides. Starting with customer proposition, we deliver a unique customer proposition through the combination of market-leading technology, breadth of product offering, and a first-class client experience that includes innovative educational content. This sets us apart from the competition. I'd like to highlight a few examples now.
If I look first at our award-winning technology, we go beyond best execution and challenge ourselves to do even better for the client. Our risk management expertise and engine allows us to deal with huge client demand, even during macro market disruption. What this means is that if the market moves to a better level for a client, our price improvement technology ensures they receive it. This is a key reason that premium clients stay with us. We know that self-directed traders see and value this difference. We are unique in offering this at scale across the broadest set of market offerings. Turning to the breadth of our offering. We are able to offer a comprehensive range of products, including leveraged derivatives, options, on exchange products, stock trading, crypto and investment products, like our IG Smart Portfolios.
We are entrenched in local markets, and this global reach with local focus allows us to act with agility to tailor our offerings. Of course, we pride ourselves on delivering an excellent client experience. We know that our clients are typically self-directed, ambitious, and sophisticated traders, so it is not enough to just offer great products and service. We believe content and context are integral to helping them succeed. We deliver this through an extensive array of daily articles, podcasts, webinars, and research reports. They're used by millions of people every month. At tastytrade, we show people how to apply the concepts in real time and maneuver in the markets through the 50 hours of live on-air shows each week. In addition, we have highly trained client managers around the world to ensure our clients get the premium industry-leading service they expect from a trusted partner.
We get the best insights from hearing directly from our clients. On the first chart, you can see the top five reasons they choose to be with us. These relate to our strong reputation and our excellent technology. Specific examples highlighted by clients include the ease of use of the trading platform, reliability, and the strength of our mobile app, along with the range of markets we offer. As a result, our current client base is one that many envy. To demonstrate this, for example, of our most active clients, 88% trade almost every single month. They typically place 21 trades per day, and the average revenue per client was GBP 21,000. The expanding base of experienced and active clients is one of the key reasons why we have delivered the impressive growth of 18% CAGR over the last 20 years.
This clearly demonstrates our ability to perform through all market conditions. We have record net promoter scores, which is a proof point of the enduring relationships and client loyalty that we build. Looking forward, our very most recent client survey of both IG and tastytrade clients show that 91% of those polled expect their trading levels to stay the same or increase. This gives us great confidence in our outlook. If we move to slide 24, we can turn to the second strategic theme, our market, and in particular, the U.S. opportunity. One of the most exciting things about our acquisition of tastytrade is that it has unlocked access to huge and growing addressable market in the U.S. To give this some context, there are 1.8 million existing active options and futures traders in this market. The opportunity is actually far larger than this.
Research shows that stock trading is a gateway product for options trading. In fact, 80% of existing options traders began with stock trading. Furthermore, one of the clear advantages of options and futures products are that they offer greater access and a more efficient way to trade, especially at prices of single shares in popular U.S. equities as they have risen so high. Given that today there are over 130 million stock trading accounts, and within these, 14 million active traders, we see significant potential for growth in the options and futures market. What this means for us is that we believe tastytrade is uniquely positioned to capture this market. Why? Because its exciting education platform already engages with this potential market.
Tastytrade have created a growing, passionate community of customers who feel like they belong among the elite, alongside veteran traders, where they are challenged with math and probabilities, aspirational but attainable. Put simply, we enable people to build both their knowledge and their confidence to trade options and futures, and as a result, position ourselves as the trusted provider of choice,t astytrade starts in a fantastic position with over 1.6 million unique registered users, across the tastytrade ecosystem, and is attracting new people every day. As you can see, the options and futures market is large and fast-growing in the U.S., effectively doubling in two years. Over that same period, tastytrade has grown even faster and has taken market share.
Tastytrade's revenue growth over the last six months is particularly impressive, as many competitors suffer during this period due to quieter markets, client churn, or concentration in specific asset classes. I'd also like to take this opportunity to highlight that tastytrade's international appeal is growing. The proportion of new funded accounts from international clients outside the U.S. continues to rise. At the end of the first half, newly funded international accounts through reverse inquiry were 19% of the total, giving some indication of demand for U.S. options and futures trading outside the U.S. As we indicated previously, we're developing plans to roll out both tastytrade and tastyworks internationally, and we'll discuss this further in due course. In terms of brand and recognition, tastytrade is an award-winning business. We are recognized by Investopedia as the best broker for options.
In addition, Forbes named tastyworks the best online broker in January 2022. Comparing 21 of the leading brokers, the Forbes Award reflected our low commission structure, cutting-edge technology, and unique resources that help traders come up with options trading ideas. These awards reflect the combination of our distinctive trading platform built on high-frequency trading technology, a great user interface, and a highly personalized client experience that we deliver. The integration of tastyworks into IG is also progressing very well. We're leveraging IG's sophisticated marketing expertise, particularly in SEO, and combining that with tastytrade's strong social media presence. We see clear synergies and complementary client audiences that will open up many opportunities for us. As we have evolved our business over the last few years, today, we have multiple levers for growth through our increasingly diverse geographic presence and product offerings.
We've moved from being over 98% reliant on OTC leverage products to 84%. This strong progress gives us real confidence that we are extremely well-positioned. Turning to slide 27, as you can see, we are also much more diversified by geography. We now have materially larger businesses in both the fast-growing U.S. and Japanese markets. These are two of the largest retail financial services markets in the world, and where we have made both organic and inorganic strategic investment. These two markets now contribute almost a quarter of the overall group's business versus around 8% only two years ago. As Charlie detailed, we've delivered excellent results over the last six months, of which I and our whole team at IG are very proud. These results demonstrate we have a platform that delivers sustainable results, and the picture is the same if you take a longer perspective.
We can see we are well ahead of pre-pandemic levels. Looking forward, I'd like to leave you with four key messages from today. Firstly, we have a very exciting future. We have multiple growth levers and a significant total addressable market. The size of the prize and the opportunity is clear, and we are well-placed to capitalize on these opportunities. Secondly, we continue to build and strengthen our revenues as we increasingly diversify our business in terms of both product and geography. Thirdly, our ability to create, attract, and retain a high-quality client base provides tangible and enduring value, as well as differentiating us from competitors. Finally, we have strong cash flow and liquidity with robust risk management, which provides us with significant financial flexibility as we look to the future. We now welcome your questions.
The first question is from Vivek Raja with Shore Capital. Please go ahead.
Hi, good morning. Can you hear me okay?
Hello, good morning. Vivek, can you hear us?
Yes.
Okay.
Yes. Can you hear me? Sorry.
Yeah, yeah. All set.
Super. I had three things I wanted to explore, please. The first one is with respect to tastytrade revenues. Just wondered if you could give us some color on the sensitivity to rising Fed funds rates, you know, the interest income that you generate on the client money balances. That's the first thing. The second thing is whether you could talk about your sort of realignment of capital management priorities that you'd discussed previously and, you know, what that means in terms of the dividend and payout potential looking forwards. The third thing was just around risk management.
Wrapping into the client income retention ratio, I wonder whether that's diverged materially in the first half from historical periods with sort of 72%-74% that you've done historically, and whether that was influenced by a change in terms of product flows that you've seen and how, in particular, clients have fared in very recent trading. You know, we suspect that some market conditions may have led to quite high client losses. Just wondered if you'd comment on that as well. Thank you.
Yes. Thank you, Vivek, very much for your questions. I think I'll turn that over to Charlie, to address each of those.
Yeah. On your first question, Vivek, about interest rates, let me start maybe just with the group as a whole, I guess maybe for context. I think you will have seen in the highlights that at the end of the half, we had GBP 4.9 billion of client money balances across the group, and that, of course, is a combination of on and off balance sheet funds. Most of that is held off balance sheet in segregated client money accounts at various banks and clearing firms. I think when looking at the interest rate environment and what sort of maybe pass through might we see on our revenues across the group for interest income going forward, I think most of those balances actually have a limited upside on interest income.
I think though they're eligible to receive interest income, banks typically don't pass much on. I mean, these are expensive balances for them to maintain. I think, as you would know, historically for IG, you know, interest income hasn't been a major component of revenue. However, though, getting to the point on your question, in the U.S., certain of our client cash balances there are eligible to receive interest income. We haven't disclosed the balances, but what I would say is that roughly for every 25 basis points of interest rate rise, we would expect to see about $4 million in interest income. Of course, you know, that would pretty much all go straight to the bottom line into PBT.
We do have some interest rate increases factored into our outlook and guidance. I would say, though, that they're probably a bit more back-end loaded. If we do start to see rates rise sharper or more frequently, we would probably come back and revisit our guidance. I would probably just point you to that gearing ratio I just mentioned of about every 25 basis points is about $4 million on average. Hopefully, that's helpful. Your next question was around the capital planning framework and basically what we're doing there.
I mentioned this back in the summer and said at the time that the reason we were looking at the framework for the group was that obviously we had seen a step change in the size of the business, you know, coming through the pandemic period. The group is simply much larger than it was before. Obviously, you know, we were at the time completing, you know, the tastytrade acquisition, the largest one in the company's history. Obviously, we're well advanced on the strategy as June, you know, has just articulated. Last, but probably as importantly as all of that is, of course, we just implemented the new capital regime, regulatory capital regime, in the U.K.
The last of those just completed really just a few weeks ago when we adopted IFPR with effect from the first of January. Right now, I mean, we're working through our transitional arrangements, you know, with the FCA. We're actually in a slightly better place, you know, than we were before. The business continues to be highly cash generative, and the discussions that we're having with the board, you know, around capital are underway. I would expect that we will wrap those up, as I said in my remarks, in the second half of this financial year. Look for us to come back with something maybe in the summertime or something like that. That's all playing out as I had originally thought back in July.
Your last question then, around risk management and looking at income conversion. Looking at the conversion rate, that's something obviously, you know, we typically you know we haven't disclosed that here, and we don't disclose that until we get to the full year. What I would say, though, is that generally speaking, trading conditions were such in the first half that I think we were able to execute our risk management program a little bit better. I think we did have a bit better income conversion than we typically see or historically see. Yeah, I think, you know, the models worked exactly as we would always look it to work. June, is there anything else that you'd like to add?
Yeah. As you know, Vivek, on our risk management, what we do is we look at that very carefully. We've actually been very, you know, disciplined as it relates to ensuring that those stay within the board guidelines. We haven't done anything extraordinary that would give you any concern.
That's super. Thank you very much. Could I just follow up? I mean, I would have lots of follow-up questions, but the main one is, Charlie, when you talk about your guidance and that you've baked in some sort of interest rate, higher interest rate scenario in there, can you just tell us what was baked in there?
We haven't disclosed, you know, separately or broken it down, you know, in minute detail. As I said, when we talk about growing, and I'll let me focus on the high potential portfolio and then of course tasty within that. As you know, we said 25%-30% over the medium term with tasty, you know, being at the higher end of that range over the medium term. As we were putting that guidance together and obviously, you know, working through our own outlooks and forecasts and everything like that, the interest rate increases that we had assumed were more back-end loaded to the medium term, you know, maybe a few years out.
Again, I think we'd all have to take a look to see, you know, what the central banks and things like that are doing. If they're gonna become more hawkish and increase more aggressively and faster than what I've just said and what we've assumed, which is a little ways out, then I think we would probably take another look at the guidance again. For the moment, we'll stick to what we've said, which is 25%-30%, tasty at the high end or higher end of that range over the medium term.
Super. Thank you very much.
Sure.
The next question is from Ian White with Bernstein Autonomous. Please go ahead.
Hi. Morning. Thanks for the presentation. Just a few questions from my side, please. First up, I wonder if you could provide a bit more granularity around your intentions in terms of the specific uses of capital arising from the sale of Nadex and Small Exchange, please. That's question one. Just secondly, in terms of new client acquisition, do you think we've seen the full normalization now of onboarding activity, and this is a sustainable level that we might see maintained or even see growth over the coming quarters, please? And finally, on tastytrade, I wonder if there's any other detail you could provide around the pipeline of new initiatives or international rollouts over the next 18 months to two years.
I know you mentioned Canada, but I think there was previous discussion of Singapore, maybe even India. Are there any more concrete plans you could share with us there, please? Thank you.
June, should I lead off just on the Nadex piece?
Yeah, that's fine.
Just at the start. So on the sale of Nadex and Small Exchange, again, as I said in my remarks, I think we're looking for that to complete probably in March of this year, which of course would be our fourth quarter. As we've disclosed in the accounts, you know, our share of the proceeds from that sale, I think, will be $216 million pre-tax, probably about $185 million post-tax. In terms of uses of that, I would just reiterate what we said at the time of the announcement and here in the material today, which is that we do think that, you know, one, this is a significant return on investment, you know, in those two businesses.
Two, it does give us obviously further capacity to invest in all of our businesses, you know, in the U.S. and around the world. At this time, in terms of deploying that, you know, we're thinking about where we can put it to the highest use. As I just said to Vivek's question, looking at capital more widely and more broadly and, you know, how we think of it with respect to reg cap and organic and inorganic growth and, you know, dividends, et cetera, those are discussions that are still underway. For right now, I think it puts us in a good position, gives us more capacity to invest in all the businesses.
Ian White, let me take your second question, then your third question. This is June Felix. In terms of new client acquisition, you know what we're really pleased, as we said, that we delivered such strong numbers in light of the fact that, you know, it's been relatively quieter markets this first half, which really goes back to the loyal and high-value experienced traders that we have on the platform today. That gives us a real foundation. As Charlie did indicate, our new client acquisition is actually up versus pre-pandemic levels, almost 30%. In terms of the new normal, I think this shows that we continue to bring on new clients at a healthy rate, even when markets are not particularly interesting. We're quite comfortable that this is going to translate to good, sustainable growth going forward.
As it relates to pipeline for tastytrade, what would be good to know is that first of all, the U.S. market is going really well. Integration's going very well. We see lots of upside there 'cause of the size of the market. As it relates to other markets that we will go into, we're in the process right now of planning out where that might be and over what timeframe, and we'll get back to you as soon as we have something more concrete to add.
Ian, I hope that helps.
The next question is from James Hamilton with Numis. Please go ahead.
Good morning. Couple if I may. Firstly, on sort of best practice within the sort of CFD trading business and in tastytrade, what I'm interested in is how far you've gone in terms of identifying and then implementing best practice across the two areas. How has your view of what best practice is and what can be achieved changed since you've actually got hold of it? The second is could you sort of comment on U.S. and Japan? I appreciate your point about, you know, the group is much more diversified, both by geography and by product line, but you are still staggeringly underweight in revenue terms in both of those markets.
I just wondered if you'd sort of help us a little bit with how much of an opportunity you think there is?
Okay. Let me start with the best practice in terms of CFD and tasty, and Charlie, you may wanna add some things.
Sure.
In terms of best practice, you know, we're very proud of the fact that our CFD business has performed so well. As we would say, we continue to innovate and add new products to that platform. We continue to create an outstanding client experience, and that was really showcased in the technology that we offer, as well as the client experience in terms of the relationship management. We feel very, very good about that, and we continue to, because we know that business so well, have done it over 47 years, we feel very strongly that we're in a good place, and we've actually outperformed versus many competitors, as evidenced in these results. For tastytrade, I think that we continue to distinguish ourselves.
The fact that we grew share over this period of time, even when the market was growing, would indicate to me that we are continuing to grow and operate at a very high level. The educational content that they've created over the 10 years, last 10, 12 years continues to show that it has a growing demand around the world, and it actually helps people trade options with confidence and get the knowledge necessary. I think that's best practice, and it's only being copied by others now. In terms of your last question on U.S. and Japan, yes, our footprint there is, given the enormity of those two markets, not large yet. What we're really struck by is how these two markets have done exceptionally well and continue to gain excellent share.
I think one of the things that is unique in both of them is we have differentiated products, differentiated approaches, which really cut through and have been critical to us gaining the share that we have and building the kind of momentum in very competitive markets that are large and continue to grow. I hope that helps, Ian. Charlie, you wanna add anything?
Yeah. I'd completely agree, June. I think, James, just maybe just back on your first question around best practices. I mean, I think as a general matter, I think the integration and the alignment of the two companies is going really well. We're starting to cross-pollinate teams back and forth from London to Chicago over to London. I think we're really happy with what we see as the two organizations, you know, start coming together and, you know, making it all add up. In terms of some specific areas around, you know, for best practice, I mean, just some that come to mind, you know, I would say when it comes certainly to content, education, things like that, you know, what tastytrade does is just absolutely amazing.
I mean, when you look at the content, you know, it's exciting, it's fun, it's informative, it's really good. That's given us some thought as to, you know, on the IG side, if you will, you know, are there things that we could do there to possibly, you know, liven it up and take a page from that book, just as one example. You know, I think in technology, I think both sides have very good technology, obviously operating on with different businesses and different business models. Obviously looking for opportunities to see, you know, where we can improve, you know, our efficiency, resilience, be quick to market, et c.. That's a bit of both on the technology side.
We talked when we announced the deal that marketing was one area where actually we think some of the IG capabilities that we built up over the last several years can really come to play with the tastytrade business. As I said, you know, in some of that cross-pollination, we've got marketing people, experts, you know, going from London to Chicago to help build out comparable type of capabilities that we've had at IG, you know, for many years. We've got a lot of things going back and forth. I would say no one is being territorial or parochial about it. We just want what's the best for our clients and best for the company as a whole. I think that's a, you know, that is a work in progress that'll play out for some time.
Hopefully that just gives a little bit more color to that part of it. Otherwise, June, I completely agree with everything else you said.
Yeah. Thank you, James.
The next question is from Martin Price with Jefferies. Please go ahead.
Good morning. Thanks for taking my question. I was just wondering if you could provide an update on how you're thinking about the regulation of payment for order flow, and how you think the market could adjust to a potential ban if that's ultimately what happens. I'm just keen to try and understand how you could mitigate the potential impact. That'd be great. Thank you.
Sure, Martin. Thank you very much for the question. This is June. What I would say is, Martin, remember, we operate in 17 different locations around the world, and we're very, very good at working with the regulators on highly complex products. We've navigated many changes over the course of the couple years even, and come out very, very well. In terms of the U.S. market, it's still early days and, you know, I think what we have to do is wait and see where that comes. Irrespective of that, we feel that we're very well positioned. We have really done a lot of thinking about that.
We also believe that payment for order flow, as has been indicated by many experts, is a fundamental part of the whole regulatory environment in order to create best execution for retail clients, and has been fundamental to the retail client trading expansion in the U.S. and the democratization of markets. That is a fundamental principle which I don't think people will back away from. You know, it's early days still, and it will take a while to come through. Irrespective, we're very well positioned.
Understood. Thank you. That's helpful.
Ladies and gentlemen, if you would like to ask a question, please press the star followed by one on your telephone. We have some questions from the web, so let me hand over to June Felix.
Okay. Thank you very much. We'll now turn to some of the questions from the web. The first one came from Jeremy Hellman . It's really talking about the business's inherent state of operational leverage. I'll pass that over to Charlie.
The question is for everyone's benefit, can you comment on the business's inherent state of operational leverage? The EBIT margin has been improving, but costs in the period have risen proportionately to revenue growth. Sure. A couple thoughts around that. I mean, operating leverage is something that we watch, and I do think it's relevant to a business like ours, where we are growing the business and investing in the business at the same time. Keeping a hand on both of those levers, you know, as much as we can, I think is important, because ultimately we wanna make sure that we generate not just, you know, obviously sustainable growth, but that it's obviously profitable growth as well.
Now obviously we have the same reality as anybody else, in that, you know, our revenues will probably always move faster than our costs will. When I look at our cost base, where I think of it as roughly half fixed in the short term, maybe half variable in the short term, I think that's a good mix because that blend of fixed and variable means that when we have more buoyant markets, such as we saw in FY 2021, we get a lot of operating leverage, positive operating leverage, and we get really high margins. When markets are slower, less volatility out there, we still actually hold on to, I think, a good, healthy margin, even if operating leverage in the short term comes down.
Even in this half, though, we still generated, I think, 100 basis points of positive operating leverage in the differential between 14% revenue growth and 13% cost growth. We still had positive leverage in the period and then driving a margin of 55%. Interestingly, you then look at last year, FY 2021, which was obviously a very good year for the group, when we had revenues up by, I think, almost 1/3 by 33%, OpEx, I think, was up 8%. Significant operating leverage in the business, and again, driving a very high margin in very different conditions. It is relevant. It is something that we look at, and something that we will try to manage to be, you know, positive or neutral, you know, over time as we grow the group.
We have another question here from Jeremy Hewlett. Can you please explain the variable remuneration decision-making process? Is it set as a fixed percentage of net revenue? Also, can you please explain some of the logic behind variable REM on the basis that staff skill sets presumably have a limited relationship with periods of exceptional volatility that drive excess profit, revenues and profits. Our variable remuneration process and is really very transparent. It's already in our annual report. It's based on things that align our interests with our shareholders, which is that it's actually focused on revenue performance as well as profits and performance in overall against the market. As it relates to the logic behind that, it is so that we want to make sure that as people perform, there is a recognition of that.
In terms of times of volatility, we would say that actually during times of volatility, the teams are working harder. It's not a foregone conclusion that we deliver the profits and the revenue that you see and that we have delivered in this first half or even during the exceptional periods of high volatility that occurred during the pre-pandemic period. Hopefully that helps, Jeremy.
Can we now go back to the operator, please, for the remaining calls from the conference call?
Yes, we do have a question from the conference call from Ben Bathurst from RBC. Please go ahead.
Morning, everyone. Hopefully, you can hear me okay. Just got a couple of questions on tastytrade and one on crypto. On tasty. Thanks for the color on the industry growth and market share within the slides. Could you confirm that the growth guidance for next year for the business is predicated on it continuing to grow market share? And sort of what rate do you kind of assume the market will grow at looking forward? That's on tasty. Then just on crypto, could you give an idea of what proportion of the OTC leverage revenues were associated with that asset class in H1, and was it an important contributor to sort of overall leverage revenue growth in the year, or is it potentially a bit of a red herring looking there?
Thanks so much, Ben. This is June. Yes, in terms of tastytrade and industry growth, you know, the outlook for the industry continues to remain strong because of the huge addressable market, total addressable market there. We would say that the, tastytrade will continue to grow share, again, because we're very well-positioned to, explain as well as, particularly during these, times where the market is moving around quite a lot, to equity traders, how options can be used to the optimum advantage. We actually see that we will continue to gain share in a growing market. As it relates to crypto was really quite small, less than about 3% of our OTC revenue. That's not a material part of the portfolio at this time. Hopefully that's helpful, Ben.
Yeah, thanks. If I could just follow up on crypto. It's 3% now.
Yep.
Where was it at sort of H1 2021?
It was still less than 5%. About 5%.
Yeah. I think, Ben, for last year, the full year 2021, we disclosed crypto revenues were about GBP 11 million in the full year. With what June just said in the first half, we've seen about GBP 13 million in the first half of this year, so it has picked up a bit. Obviously, mainly for us, this is derivatives on crypto. We have some cash crypto in the U.S., that's being offered, but most of this is on the derivative side.
Okay, great. That's helpful. Thank you.
Yeah. Obviously, you know, set against the wider, you know, OTC business and all the asset classes that are available to our clients, you know, they still overwhelmingly are trading the more traditional asset classes, indices, commodities, foreign exchange, et c., et c.. We have some, but I wouldn't say it's a big driver right now for us.
This concludes our question and answer session. I would like to turn the conference back over to June Felix for any closing remarks.
Great. Thank you everyone for your time. We're really excited about the future and the outstanding results we delivered the last six months. We will be available to answer any further questions. Just please do reach out to our Investor Relations team, and look forward to talking to you soon. Thank you again.