Great. Thank you, and welcome to those of you in the room, and welcome to those of you that are joining us online. You will all be relieved to know, as I was, that no AI was injured in the making of that video. One of the characters apparently only had three fingers in the first edit. I am excited to be here today. I think this is an opportunity to show you what we have built, what we are building, and where we go next in terms of the next phase of IG's growth. Over the next 45 to 50 minutes, you will hear from me and some of our colleagues, and then we are going to go straight into questions from the room and other questions from those joining us online. If we go back to March on the next slide, please. We initiated a strategic review.
I felt, given the momentum of the business then, there was an opportunity to do that, and in truth, a necessity to do that, to think about what this group would look like in the years to come. As we formally conclude that review now, we are announcing or have announced three material decisions. I guess starting at the end, the acquisition of Underdog will change the group for the future. Our U.K. revenue base will be now about 25% of the group rather than the historic focus and dependency in the U.K. In that context, the redomicile to Jersey gives us strategic and financial flexibility in the years ahead. With that review, we did work on what the company looked like on the inside as well, and that led to a refreshed organizational model that you will hear more about today.
We think now more than ever that high-quality decision-making needs to be made at pace to best address the customer needs across the different verticals that we operate in. We think then that we have made good progress. Sure. Thank you. I am very happy with that progress. Back in July 2024, we talked about needing to close product gaps and simplify our propositions to address customer needs. We have shown we can acquire customers efficiently and at a scale we have not in many years. We have shown that we can grow trading revenues. Like markets, turnaround operating businesses do not move in a straight line, and we fully recognize the disappointment of RtV, return to volume, that was delivered in Q3, and we will talk more about that, as you would expect today. But I am happy with the progress that we are making.
I am proud of the momentum in the business, and I am looking forward with excitement to the years ahead. If we go then to This, I think, is a key slide. We have talked for a long time about how active customer numbers shows evidence of progress and retaining those customers as we are and increasing engagement with those customers through multiple products as we are, is a core platform, is a core part of the premise as we look forward. You will hear more this afternoon about the progress that Michael Healy and his team have made in the U.K., and how we have confidence from that in how we can roll that out in other geographies around the world. As we said two years ago in July 2024, we had to close product gaps to grow active customers.
We will talk more about this in the next few minutes, but our unified proposition is now live in the U.K. We are bringing together trading, investing, and entertainment. This is a significant milestone for IG, and Michael will talk more about that. The acquisition of Underdog, once delivered, will further add both scope, market to grow in, but also capability to accelerate that growth. Now, you have seen a version of this slide before. We operate in very large addressable markets. Our penetration is low. Even modest share growth can transform the economics of this business, and we are making progress. Our focus is on delivering great product at pace to capture this shared growth. Underdog adds more verticals, adds access to U.S. fantasy sports, gaming, and prediction markets. That broadens our opportunity and expands our reach geographically, specifically into the United States.
We believe, as we have said before, that strong structural drivers underpin growth in these markets. Governments are increasingly incentivizing savings and investment. People are increasingly trading and investing more for themselves. A younger mobile-first generation is now engaging with markets in a different way than previously. We are positioning IG to capture more of this opportunity, giving customers the products they want to manage their own finances and to act on their own views or their own opinions of these markets. We talk then about convergence, and I think it is worth explaining what we think that means and why it matters for IG. The same customer wants to do several things.
We are long past the kind of Benjamin Franklin view of the world. We have customers now who want to trade in some markets, invest in others, hold crypto, take positions on the outcome of an event or even a sports event. The lines are blurred between trading, investing, and entertainment, and IG is well-positioned to capture that. We have a global multi-asset platform that serves people who want to engage, who want to trade, who want to invest, who want to take a position. We have trusted brands that have been built up over years around engagement, education, around entertainment. With Underdog now, we have access to fantasy sports and prediction markets. Delivering on this opportunity needs the right organizational model and the right team. This team here, you know Clifford, you know me. Some of you have met Michael before.
You will meet some more of the team today. Jeremy Levine presented on the 8th of October, and some of you met him around then. I also want to call out two other people who are not with us in the room today. Sarah Gore Langton, who runs risk for us, has been with IG for 10, almost 11 years. She and her team add value day to day by challenging our thinking, by helping protect our customers, by helping protect our employees, by keeping us on the right side of regulators in terms of compliance, in terms of risk, in terms of trading. Doing that with centers of excellence in London allows us to accelerate our growth around the world. Louisa Meyer has a background in media, has a background in betting. She has worked in industries that have consolidated.
And if you go back to the slides of the summer of 2024, we talked about the cultural change that was underpinning the growth we were pursuing. As we think harder about compensation, as we think harder about incentives, as we think harder about culture, she and her team are also helping drive the transition that's necessary to deliver on the potential for the company. Turning to our priorities, each division has its own priorities. The team will bring those to life today. Together, they underpin what you can expect from IG financially. That's strong, diversified revenue growth, greater efficiency, enabling us to further invest in growth, and a commitment to disciplined capital allocation. With that, I'll hand you over to Michael Healy. All yours.
Thank you, Breon, and good afternoon, everyone. I joined IG at the start of 2025, having spent the previous 15 years working in fast-growing and entrepreneurial consumer-facing businesses, including Deliveroo, Flutter, and Ryanair. My experience is centered around P&L management and delivering strategic change. I initially joined IG to run our U.K. business, our largest and most mature market. I was attracted by the structural tailwinds Breon articulated earlier, the latent potential in the business, as well as the team's clear appetite for growth and change. in July, my remit grew to cover all our direct-to-consumer business outside of North America. Today, I'll cover the playbook we built in the U.K. and how we now take it across all of IG Consumer. First, a quick look at what IG Consumer is today.
IG Consumer is a scaled, self-directed online investing and trading business across the U.K., Asia-Pacific, and Europe, with total revenue over the last 12 months of GBP 878 million. It's highly profitable and cash generative with outstanding unit economics. Our brand is trusted, our derivatives and regulatory expertise is hard to replicate. Strong foundations are not enough. We want faster growth, and we want greater relevance, and we've begun to deliver both. This slide shows the U.K.'s journey over the last 21 months. When I arrived, U.K. growth was low, and we were a narrow OTC specialist. Competitors were moving faster and spending more on marketing, and we'd been slow to respond to changing customer needs. I was convinced we had a clear right to win the U.K., but we had to change how we operated. Our North Star is now sustainable, active customer-led growth.
A multi-product proposition which complements rather than replaces our OTC business is how we deliver it. We have changed how we acquire customers from a narrow fixed-budget approach to spending that flexes with demand and customer value. More than 50% of new customers now place their first trade outside OTC. These are the next generation of retail traders. They underpin future growth in our OTC business. Encouragingly, those customers that have cross-sold to OTC products to date are worth the same as the retail OTC customers we acquire directly. We've done this with commercial discipline and stronger marketing, tech, and analytics, which gives us the confidence to keep investing. Our strategy is working and growth is accelerating. U.K. active customers are up 22% this year after 3% growth last year and a decline the year before.
The quality of actives growth in the U.K. is also superior to that in other markets. The actives growth is converting into revenue growth. Since the playbook launched in early 2025, the U.K. has grown revenue twice as fast as the rest of IG Consumer on a CAGR basis. We believe this approach transfers internationally, and our new consumer organization lets us apply it more broadly. The engine is the same everywhere. One platform, a data-led acquisition model, and a digital-first service model. What changes locally is product range, tax wrappers, regulation, and brand awareness. Consolidating around a single international platform gives us additional capacity to address these local nuances. We are now rallying IG Consumer around one vision, to build a leading international platform for active investors. We choose these words carefully.
Our U.K. success comes from focusing on the customers where we have the most experience and credibility, active investors. People who have a view and choose to act on it in the markets. We are not trying to serve everyone. Mass market access is crowded and not our core focus. Instead, we build for engaged investors. We say investors, not just traders, because our customer base and our product range is broadening. International platform means one platform that scales across all of IG Consumer's customers and markets, giving us more pace and higher operating leverage. We deliver on this vision through three priorities: broaden and enrich our proposition, invest in our brand, and enhance efficiency. Turning first to broadening our proposition. Over 18 months, we have rebuilt our customer-facing apps and websites from scratch.
One platform now covers CFDs, spread betting, share dealing, crypto, and from later in Q4 2026, prediction markets. It is mobile-first, shaped by customer research, and designed to drive multi-product use and cross-sell. The rollout is underway in the U.K. and reaches our international markets during 2027. Early results have been encouraging. This product matters for three reasons. A much better experience for existing customers, access to a broader target market, and faster product delivery on a single, more reliable code base. Here is a short video.
We have built the next generation of trading and investing, a unified international platform that brings more of a client's financial activity together in one place. We have enriched the trading experience with more ways to trade, from prediction markets, pre-IPOs, to 150 of the top cryptocurrencies. We have made trading more accessible with fractional shares, streamlined onboarding, and a simplified trading UX. We have expanded our universe from 12,000 to more than 20,000 instruments, and we have extended our hours to 24/7 trading and customer support. Our unified platform gives clients the confidence to discover and engage with new products. IG: Trade. Invest. Progress.
I want to spend a moment on our first move into prediction markets outside of the U.S. We see strong appetite for this product in the U.K. Customers find it appealing and traffic to prediction market platforms is growing. But the U.K. is different. Regulation is split between two regulators, and retail customers cannot trade binary options. Despite this complexity, we have found a route to market with a regulated product that addresses this growing customer demand. Prediction markets will launch later in Q4 2026 for professional investors initially, offering 24/5 tax-free trading across a range of financial assets. We have also applied for a U.K. gambling license and expect to broaden our target market and add politics, entertainment, and sports markets in early 2027. This planned launch also shows a change in culture. We used to hold back where regulation was uncertain.
Now we embrace and solve for changing customer needs. The completed and planned upgrades we have made to our proposition are guided by our desire to build a compelling platform for active investors. Active investors are more likely to use several products, and those customers are worth more and stay longer. In the U.K., we can see this working. First trades on a second product are up 65% year-on-year. Multi-product customers currently generate nearly three times the ARPU of single-product customers, and our 12-month retention is 52% higher. And unit economics have to date held as we have scaled acquisition. The customers who cross-sell into OTC products are worth the same as the retail OTC customers we acquire directly. This creates a flywheel. More multi-product customers, higher value and retention, faster paybacks, and more capacity to invest in marketing.
We expect product improvements, like our unified proposition, will also support improved cross-sell rates over time. This flywheel already powers the U.K., and it is still early in our international markets. Our priorities from here are clear. Roll out the unified proposition internationally. Broaden the markets, instruments, and tax wrappers available to customers. Enrich the experience with better tooling. And expand into adjacencies such as predictions. Together, they deepen our share of wallet and open IG to new customers. Turning to our second priority, investing in our brand. Our unit economics give us the confidence to invest. Marketing pays back in about six months, and customer value over the first 36 months of their lifetime is currently around four times acquisition cost.
We have held these returns while raising marketing from 6% of revenue in 2024 to 10% in the first half of this year, and while simultaneously attracting a more diverse customer mix. The peer average is 16%. So we believe there is room to invest more at attractive returns, and we will keep scaling only while paybacks hold at acceptable levels. That step up rests on a rebuilt marketing engine powered by data, analytics, and AI. We have widened our reach. We compete where new investors start, such as share dealing and spot crypto. And we now use more than 15 channels, up from six, including AI search tools. We shift spend in real-time towards the channels, products, and markets that convert best and bring in the most valuable customers. Onboarding is now largely automated. 89% of applicants are verified instantly.
So far, this has been built mostly in the U.K., but it is now mature enough to roll it out across other markets. Alongside that, we are being bolder with the IG brand so that it stands out. We speak up for customers in the media and with regulators as a distinctive voice for wealth creation. Partnerships across traditional and new media reach a much broader audience. Here is an early reveal of our new TV ad, which is being finalized ahead of a rollout across the U.K. next month.
I could do better, better. Anything I can trade, I could trade better. I could trade everything better with you. Anything I invest, I invest smarter. I invest everything smarter with you. I got big ambitions for all of my positions. Smoother moves than ever, investments all together. Anything I can do, I could do better. I could do everything better with you. All your trades and investments in one app, super powered by IG.
The U.K., where we track this best, shows the clearest evidence of progress. Compared with last year, U.K. brand search is up 26%, awareness is up 29%, and consideration is up 48%. Importantly, that interest is converting. First trades across IG Consumer are up 81% at the paybacks I described. We are unlocking the potential of the IG brand. Our third priority is efficiency, which helps us fund growth ourselves. I will start with pricing. We have made our pricing smarter, so the spreads we offer better reflect market conditions and the underlying costs to hedge. That allows us to consistently offer deep liquidity and wide market availability, including 24/7 markets, weekend markets, and pre-IPO markets. We have also reinvested part of the gain in accessibility, such as lower minimum trade sizes and zero commission share dealing.
Overall customer income per GBP 1 million traded is up 11%, and customers' perception of value has also improved. On costs, we are reshaping our cost base to fund the next phase of growth. Our recent reorganization removed layers and increased talent density in fewer locations. It targets a reduction of about 30% in IG Consumer's workforce. Part of this is enabled by automation and AI, which are lifting productivity. AI has delivered an eightfold gain in engineering productivity in parts of our tech organization, and 72% of digital chat queries are now resolved by AI. More is to come from integrating Freetrade and Independent Reserve, optimizing marketing, and from further rollout of our AI-first service model. The result, cost to serve per customer is down 10% year-on-year, and U.K. net promoter score is up 6 percentage points. We are encouraged by the progress and we see more to come.
Our confidence in delivering the plans we have just discussed rests on a reshaped talent profile. We have augmented our historic strength and derivatives and trading capability with talent from high-quality and high-growth tech organizations. The capability these colleagues bring play a key part in delivering our future growth. There are four things I want you to take away from this part of today's presentation. First, we have shown a credible path to sustainable, actives-led, multi-product growth in our core market, the U.K. Second, we are upgrading this playbook with the rollout of our unified proposition, our most material proposition uplift in over a decade. We are also rolling out our approach across IG Consumer. Third, our unit economics support continued investment. Fourth, we see a meaningful opportunity to fund much of that growth through efficiency. Our task is clear.
Build on this progress and scale it across IG Consumer's markets to become a leading international platform for active investors. I will now hand over to Andy Biggs, who is going to cover IG Securities.
Thanks, Michael, and good afternoon. I am Andy Biggs, CEO of IG Securities. I have spent my career in liquidity, trading, and risk management. I have built a business from zero to trading $20 billion a day and spent eight years at Finalto, a non-bank liquidity provider and trading technology business, including the last two years as CEO. Leaving was a tough decision, but I joined IG in April because I saw a huge opportunity to improve our trading strategies while bringing trading and technology closer together so that improvements in one can drive improvements in the other. IG Securities brings together three capabilities. Trading and liquidity provision, Prime, our institutional and B2B2C business, and the platform technology that powers the group. The people who price and manage risk now work alongside the people who build the systems they use. These parts reinforce one another.
Retail flow enables us to create unique liquidity for Prime. Institutional flow helps us diversify and manage retail risk. Platform technology is a solid base that IG runs off, from infrastructure and security to data and core trading systems. I am looking forward to explaining why we are confident in our market-making approach. I will cover how the model works, what the data shows, including Q3, and what we are changing. Market making is the core of what we do. We give our customers a price, increasingly 24/7, so they can express a view on the market. We do that in over 15,000 markets, and we cross tens of billions of dollars of notional volume every day. Market making at IG comes down to three decisions, pricing, risk management, and hedging. We compete on the quality, speed, and consistency of our prices and execution.
Our core income is the fee and commission on each OTC trade, including funding costs. Each trade offers an opportunity to capture the transaction fee or spread. How much we capture is supported by risk management and hedging. Our clients are buying and selling all the time, and much of it nets off or offsets. For the remainder, we have a choice. We can hold the risk for longer, which gives more time for flow to offset, but exposes us to more market risk, or we can hedge it with counterparties. Hedging steadies our revenue, but is costly. We strike that balance asset by asset within board-approved limits. How does this show up in our P&L? Client income is the fee, commission, and funding income we make on every trade.
In our OTC business, we deduct our hedging costs and then add or subtract performance from any unhedged market risk. What is left is net trading revenue, which we measure as return to volume or RtV. Net trading revenue as a percentage of client income. In relation to RtV, let me show you where we were, where we are, and where we are going. The approach we used before July 2025 served IG well, but we saw an opportunity to improve it. At the end of the first half of 2025, we rolled out measures that increased RtV by capturing more spread income and lowering hedging costs. We aligned our spreads more closely with the underlying market. This improved the experience for customers trading in larger sizes whilst better reflecting the cost of hedging. We also widened market risk limits and deployed new algorithms to let us hedge more passively.
Looking forward, we are building three capabilities. First, sharper low latency pricing, allowing us to go from making 10 decisions a second to 1,000. Second, risk management strategies extended across more asset classes and types of flow. For example, managing B2B and B2B2C differently. Third, more efficient hedging, which lowers our effective cost without taking more market risk, giving us more options on strategies. In short, we have chosen to hold more risk, and now we are continuing to build the capabilities to price and hold it better. Since July 2025, RtV has averaged around 80% above our long-term average. As we said at the time, we expect a higher average over time with greater short-term variability. RtV is influenced by product mix. Products with wider spreads are generally more volatile and more expensive to hedge. IG’s flow tends to weight towards indices more than peers. 2026 is lower than 2025 so far.
Q1 saw extreme swings in commodities, including bullion and oil, which were expensive to hedge. Q2 was strong. Q3 was the softest quarter of the year, which I will come to shortly. The next slide puts that variability in context. In July 2025, we changed how we manage risk. We chose to hold more risk for longer. This slide shows what that has meant for RtV. Each curve shows the range of quarterly RtV outcomes we would expect based on actual trading results. The gray curve is our previous approach from 2018 to mid-2025. The blue curve is our new approach. Two things stand out. First, the average has moved up from 75% to 80%. Second, the range has widened. The gray curve is tall and narrow, predictable but capped. The blue curve is lower and broader, and most of that extra width sits above our historical average, not below it.
This is the trade-off we choose deliberately. A higher long-term average in exchange for more variation from quarter- to- quarter. That variation will show up in individual quarters. Q3 2026 at 70% is a good example. It sits within the modeled range, and on the next slide, we will show you what drove it. Every strategy has conditions it finds hard. Q3 was one of them, and these two charts show why. Our business earns more when clients have more to trade. For most of the quarter, implied volatility was subdued, with the VIX averaging closest to its lowest level in two years. That gave clients fewer opportunities to trade and lowered our rate of internalization. At the same time, the Nasdaq moved within a narrow range, which made it harder for us to capture the full transaction fee.
Lower volatility combined with range-bound markets is the most challenging environment for our strategy. How would our historical strategy have fared in the same conditions? Our back testing indicates it would have delivered a Q3 RtV of around 70%, broadly in line with what we achieved. Q3 performance reflected cyclical market conditions. We are confident the model is working as expected, and we continue to work on enhancing it. Over time, we expect to deliver a structurally higher RtV with greater variation quarter to quarter. Turning to platform technology. Everything I have just described depends on technology. In our business, it is not a support function, it is how we price, manage risk, and deliver for our clients. Three programs give trading the stability, speed, and foundation to price and manage risk and hedge in more ways. First, modernization. This simplifies older systems and improves stability and security.
It is also one of the places where we are using AI at scale today. AI-assisted tooling is preparing our services for cloud migration and moving them onto modern deployment pipelines. We readied 640 services in six months, cutting the time per service from days to hours. That frees our engineers to focus on what differentiates us, and it means each engineer can deliver more. Second, trading system uplift brings faster pricing and better tools. That is what enables the sharper pricing and broader range of risk strategies I described earlier. Third is cloud migration. This lets us deliver products faster and scale easier with improved security while latency-sensitive pricing stays on dedicated infrastructure. All three are being delivered within our existing investment plans. IG Prime brings the pricing and risk management I have spoken about earlier to institutional clients.
In my prior role at Finalto, I gained significant experience in how best to run and scale businesses similar to our Prime business. I see a lot of potential here, and it is one of the important reasons I joined. Liquidity and trading is its established core. As we move to a more advanced market-making approach, we see real potential to deepen that with strong products and greater wallet share. Prime Brokerage diversifies us into reoccurring revenue from financing and custody, which is less dependent on trading outcome. White- Label puts IG's technology in the hands of partners under their own brand, opening up new geographies and client segments without us having to build that distribution ourselves. In May, we launched our first with Investec Prime Services. Prime is a small part of IG today, but we start with real advantages.
IG's reputation as a leading retail broker, our balance sheet strength, proven technology, and the depth of liquidity our retail flow provides. The operating model to bring this all together is built on traders, quants, and engineers working as one team. We have four dedicated asset class desks that have embedded IG knowledge. We are pairing that with a London-based quant team with new expertise and engineers working alongside both. We are investing in our quant team with talents from the likes of Citadel Securities, Qube, Susquehanna. It is important to say that we are not trying to compete with these firms. We recognize that the external market talent can be used to improve how we manage retail flow and the liquidity proposition for Prime.
Bringing engineers to work alongside trading and quant teams has shortened the time from research to production from weeks to days, giving us faster iteration on improving aspects of trading. All of this happens within clear limits. We measure risk thoroughly and hold people accountable, which is what allows us to take more risk with confidence. I will leave you with four key takeaways. IG Securities prices and manages risk on IG's customer flow, builds the technology the group runs on, and runs IG Prime. Since mid-2025, the enhanced measures have, on average, delivered an RtV above our long run average with more variability. We expect sharper pricing, a portfolio of risk strategies, and more efficient hedging to improve RtV over time. Prime brings the same approach, but to a broader institutional business and gives us exposure to reoccurring revenue and stronger growth. Thank you.
I will now hand over to Mike Vaughan with tastytrade.
Thanks, Andy. Good afternoon, everyone. I'm Mike Vaughan, CEO of tastytrade. My career has been split between building and backing companies from early-stage startups to growth-stage businesses in Silicon Valley, New York, and now in Chicago. In my recent operating role as COO of Venmo, I helped take the business from its early days through its acquisition by PayPal, then scaled it to more than 40 million active users and over $100 billion in annual payment volume, making it the category-defining P2P payments product in the U.S. I saw something rare at tastytrade, a highly profitable business, customers who are quite loyal, in a market that is growing with significant upside potential. There aren't many places where all those factors exist. I was brought on 12 months ago to shape a team and a product that will capitalize on this opportunity.
I'm excited to share more about where tastytrade has been and where we're going. tastytrade is in a strong position today. We operate in a fast-growing market where U.S. options volume is up over 75% since 2021. tastytrade's revenue has outpaced the market, up 92% since the IG acquisition in the same year. Our core customer is an experienced, options-focused trader, which has allowed us to build a business with compelling economics. Our marketing spend is highly efficient with a seven-month payback, more than three times LTV to CAC over 36 months. If we look over a longer time horizon, our LTV to CAC increases to over six times, which speaks to the stickiness of our core customer. Even as revenue has nearly doubled, EBITDA margins have held in the mid-40s.
Now, one thing you'll notice in the options volume chart is a rapid expansion over the last two years. The question is, what's happening and how do we get a bigger piece of that pie? Let's start with the first part of that question. What's happening? Younger investors are trading options in record numbers, and we're underrepresented with them. Traders aged 18 to 34 make up 39% of U.S. options traders, nearly double the share on tastytrade's customer base. At the same time, 46% of active U.S. investors now place trades on mobile, compared with 29% of tastytrade customers. Traders increasingly work across asset classes. Those who also use other platforms average 3.4 products versus 2.5 for those who are exclusive to us. tastytrade built a best-in-class options platform when trading derivatives meant options and futures.
The market has expanded, and by bringing that same quality to stocks, crypto, prediction markets, and perps, we can meet that demand, build deeper, more valuable customer relationships. Now, how do we get a bigger piece of the fastest-growing part of that pie? Let me be clear up front. This doesn't change our focus on our core options trader. We'll keep investing in what they love, tools, execution speed, customer service, community, and education. Where we go next is a natural extension of that. We're building a more accessible, still sophisticated platform for trading more assets in more ways. We're not chasing beginners buying their first $10 of Tesla. We're building for investors who are ready to level up, meeting them earlier in their journey so we can acquire them efficiently and keep them as they grow into our core customer. We'll do that in three ways.
First, a new mobile experience. It doesn't replace desktop, but it's built mobile first with native AI, so traders no longer need desktop as a crutch. Second, product breadth, stocks, options, futures, crypto, prediction markets, and more. That lets us acquire beyond options, cross-sell as traders explore, and keep our core on our platform. Third, a refreshed brand with education and content at scale. tastylive was tastytrade's foundation from day one, but it hadn't kept pace with how people consume content. We're rebuilding it to reach the next generation of traders wherever they are. All these initiatives unlock a more efficient acquisition engine, open new cross-product opportunities, which helps us build a larger, more diverse customer base, and leads to a more durable business. Critically, we can pursue this growth while maintaining our operating margins and relative cost structure.
Because of the way technology and marketing are delivered today, lets us scale in a fraction of the time and at a fraction of the cost. How do you build a great product and a high-growth business? You start by building a great team. We've added people with experience taking businesses from zero to tens of millions of users at firms like PayPal, FanDuel, Robinhood, Fetch, Uber, and others. They've lived the growth playbook. We've also brought in key talent from across the industry, companies like E-Trade and Schwab, to complement the experienced team we already have here at tastytrade. These are builders who know how to scale tech companies and operators who understand the active trader inside and out. tastytrade has never had this type of team, and these are the people who will take this business to the next level. A little history.
tastylive is our financial media network and content engine with daily live shows, YouTube streaming, newsletters, market coverage, and education. It's where traders come to learn and where it all started for us. 15 years ago, tastytrade pioneered this category. We've become the home for options education. This is still a strong pillar for us, but traders won't find us by accident. It's harder than ever to get your content to stand out. We've moved from one voice and one way to trade to an open, collaborative platform. We now bring in experts from across the industry with different perspectives and different strategies. That gives our viewers more compelling content and gives us more reach through our collaborators' own followings. The early results show that we can win beyond the core option trader. We've had triple-digit growth in organic views and engagements and millions of views from new audiences.
tastytrade is taking the same path, modernize the experience, sharpen what our core loves, earn a wider customer base. tastylive shows it works. I hope that gives you a flavor of what we're doing at tastytrade. We're building on a profitable core options business while creating the experience to reach a new generation of traders, younger, mobile, AI native, and trading in new ways. We've assembled a brilliant team to capture that growth without sacrificing our operating margins. Thank you. I'll now hand it over to Clifford.
Thanks, Mike, and good afternoon to you all. I will wrap up with the final segment on financials. You have heard the commercial priorities of each division. These will deliver the financial objectives set out here. First, strong, diversified revenue growth with greater exposure to structural growth. Michael, Andy, and Mike have set out how they are delivering this, and Underdog adds further growth and diversification. Second, efficiency and profitability. Lowering our cost to serve, investing efficiently in product and marketing, and maintaining strong margins. Finally, disciplined capital allocation, an investment-grade credit rating, a progressive dividend per share, and a clear M&A framework with excess cash returned to our shareholders. Taking each in turn, starting with revenue. I am proud of the progress we have made growing and diversifying the business. You can see here on the left that organic revenue has grown every year since 2023. Q3 revenue this year was disappointing.
Andy has explained why, as well as our confidence in delivering a structurally higher RtV over time. We are operating within our expected parameters with room to improve further. Freetrade and Independent Reserve have been important steps in diversifying our products and customer base. Performance here has been mixed, and the strategic logic remains sound and deeper integration will unlock their potential, as Michael set out. You can see here on the right, our revenue mix is developing well with contributions from those acquisitions. In 2023, OTC derivatives were around 70% of revenue. Pro forma for Underdog in 2026, that falls to around 50%, with fantasy sports and prediction markets at around 25%. That makes IG less reliant on any single product, more exposed to faster-growing markets, and more resilient through the cycle. IG and Underdog's revenues show no correlation, so together, we expect lower revenue variability.
Our sustained growth is valuable provided we can deliver it efficiently, and we are all committed to strong cost discipline. Our high-performance culture is driving down our cost to serve. I am pleased with progress and clear that there is more for us to do. Here is what we have already done. Michael took you through it in Consumer. We have simplified the operating model and taken out management layers, streamlined our office footprint, and deployed digital servicing and AI. As a result, you can see on the left the average headcount has fallen even as the business has grown, and on the right, cost to serve per customer is coming down nicely. Here is what is still ahead, and it is meaningful. As Michael set out, our refreshed organizational model will deliver a reduction in the IG Consumer workforce. We are scaling our AI first servicing model, driving engineering productivity, and further integrating Freetrade and Independent Reserve.
We have more to do on efficiency in the U.S., a clear focus for me and the U.S. team. As revenues grow faster than costs, we open the jaws between the two, and that operating leverage funds our investment in growth while safeguarding margins. Let me show you how we are putting that efficiency to work on the next slide. The slide here shows how we have reduced fixed remuneration as headcount has come down and reinvested those savings in marketing. The chart on the left shows that operating costs as a percentage of revenue have fallen between 2024 and the first half of this year, with fixed remuneration and other costs down five points and marketing up three. On the right, you can see marketing spend rising as a share of total revenue. This is marketing that works.
The lifetime value of an IG customer is a strong multiple of the cost of acquisition, and our paybacks are under six months. Michael and Mike showed you the engine behind that in both consumer and tastytrade. We intend to keep going. We see a clear room to invest more where the returns are this strong, funded from the efficiencies in our operating model, growing the business faster whilst protecting our margins. Turning now to capital allocation. This slide shows the refinement of the framework that we set out in July last year. The principal change reflecting the Jersey redomicile, which I will come to on the next slide. First, a strong balance sheet and a commitment to an investment-grade credit rating. To date, we defined our strong balance sheet by reference to regulatory capital requirements.
We have refreshed this as regulatory capital requirements after the Jersey redomicile will no longer apply at the consolidated group level. Second, we are maintaining our policy of a progressive dividend per share. Thirdly, disciplined M&A. Here our policy is unchanged. We assess every opportunity against our clear return criteria. Finally, return capital not required for these priorities. We expect buybacks to resume in 2027, depending on share price performance and other demands on capital. In the past five years, IG has returned over GBP 1.6 billion to shareholders via dividends and buybacks. Now, a few moments here to explain the redomicile to Jersey. Today, the whole of IG Group is subject to capital requirements set by the U.K. FCA. This means non-U.K. businesses are required to meet capital requirements at the local subsidiary level and also fall into scope for U.K. capital requirements at a consolidated group level.
That made sense historically when almost all our revenues came from the U.K. Following the Underdog transaction, the U.K. will account for less than a quarter of group revenue, so a U.K.-wide group capital rule no longer fits the shape of our business. Moving our holding company to Jersey creates a simpler structure aligned with our global footprint. Each of our regulated subsidiaries carries on and before complying with local regulation. What changes is that the U.K. capital requirements no longer apply across the entire group, and only businesses with a U.K. parent will be subject to U.K. capital requirements. The result is a simpler, more capital-efficient structure, giving us greater financial and strategic flexibility as a group where we remain fully committed to an investment-grade credit rating.
We expect the redomicile to complete later this year or in early 2027, and the refined capital allocation framework takes effect after that. Today, we are also reiterating our existing financial guidance. For 2026, on the left, we continue to expect mid-single-digit total revenue growth and a group EBITDA margin in the low 40s. This guidance is unchanged from the trading update we issued on the 2nd of October, and three weeks into Q4, we are confident reiterating this today. Over the medium term, we are maintaining our standalone guidance of at least 10% compound annual revenue growth with a group EBITDA margin in the mid-40s, both excluding Underdog. To be clear, this is growth over the medium term, not a commitment to at least 10% in every single year. We will continue to see revenue variability quarter to quarter, reflecting market conditions.
Our confidence in the medium term is underpinned by customer growth, product expansion, and by our ongoing work to increase OTC RtV over time. We do expect some further restructuring costs and will report these as they go. Underdog then takes the combined group higher. We expect it to lift our revenue growth rate above the standalone 10% over the medium term with the pro forma group margin initially below IG standalone and expanding as Underdog scales. To conclude, our financial priorities are clear. Strong, diverse revenue growth, efficiency savings that fund investment in growth and discipline capital allocation. A financial framework is only as good as the businesses behind it, and you have heard today our confidence in our business. Michael showed how the U.K. playbook is driving active customer-led growth, where he is now scaling across IG Consumer.
Andy set out how IG Securities is structurally lifting OTC RtV and building a stronger institutional business. Mike showed how we are positioning tastytrade for a broader market opportunity in the U.S. And Underdog adds to the group's growth profile. It is this team and these businesses that will deliver the numbers. I am proud of what we have delivered and clear that we have more to do and excited about where we are taking IG. With that, I will hand back to Breon for closing remarks.
Thank you, Clifford. You have seen each of our divisions has clear priorities. The business has momentum, and we are building from a position of strength. Thank you all for joining us, and we would be very happy to take some questions. If I just ask that you. There is a mic, and if you press the button, then the people on the call can hear you as well. And maybe just introduce yourself so my colleagues know who you are as well, please.
David McCann from Deutsche Bank, if I may to start. Thanks for the presentation. The first one is just on the short term. Clifford, you mentioned just then you are reiterating the guidance for the full year as things stand three weeks in. I mean, the VIX has overall remained quite muted. There has been a couple of days where it spiked up a bit, but it has been muted. Your guidance does imply a return to somewhat more normality in Q4, certainly compared to Q3. I mean, do you see any risk to that guidance, I guess is the question. I appreciate we are early on, but that is the first one.
Going back early in the presentation, second question, you said that you were sort of no longer waiting for regulation to be certain and clear in certain areas, and obviously you have entered the U.K. prediction markets, announcing today there. With that in mind, are there any risks we should be conscious of? Is there anything meaningful that is unresolved here as far as the regulator concerns for the entry into that business? Then I guess the final one from me, you put that slide up again where you have showed that the cost to serve, compared to peers, is still quite high and presumably over time will come down, and it looks like you could roughly halve it if you kind of deliver on that. But I guess you are keeping the EBITDA margin guidance similar at mid-40s. I get some of that is reinvestment in marketing.
But over time, presumably there is a bit more you could unlock there if you really did deliver on that cost to serve. Maybe just bridge that one for us as well. Thank you.
Sure. Thank you for the questions. Clifford, will you take the guidance one, Michael, will you take the reg one, and also just talk about your confidence in how we could drive more efficiency, and then I will wrap up with how we will reinvest that. Clifford.
Yeah. So on guidance, we first stated our guidance three weeks ago. We are confident enough to reiterate it. We are traveling comfortably. Is there any risk? Sure, there are risks. I think Andy did a clear job of explaining how market conditions drive our result. But we are comfortable as we stand today.
Yeah. Addressing the two points in turn, starting at regulatory risk. I guess what we are trying to get at is that we think there is an opportunity to innovate inside the regulatory perimeter, and that is what we are trying to do in the U.K. So we are extremely confident that the product we are offering professionals is absolutely fine when in context of regulation. Our expansion into sports, entertainment, politics is clear. There remains a level of ambiguity around retail customers, but we will work inside the regulatory perimeter to allow us to expand products as and when we can. Addressing your point around efficiency, I guess there are three points that would give me confidence around our ability to drive further efficiency. The first is that we, like many other businesses, are seeing technology, and in particular AI, transform our ability to do work.
That materially impacts us in technology, but also in operations. So that gives me the significant headroom there. We talked about seeing initial productivity gains. The second is we are shifting the way we service customers towards one that is much more graceful, much more orientated towards self-serve, much more orientated towards digital servicing. So there is significant operating leverage in that. The third point is culture. Ultimately, we have shifted the ambition of the organization focused around growth. The conversations we have had to you today about marketing efficiency are conversations we have internally. When our colleagues can see there is an opportunity to grow by finding the capacity to invest in marketing, it changes the mindset around how you spend money. Ultimately, we become much more excited about freeing up capacity to drive future growth.
Yeah. Just to pull that together, we could run this business. We have said now for the last couple of years, we could run this business more leanly, but we think in the service of our shareholders, we should reinvest with confidence. I hope after the last hour or so, you see that we have confidence investing in product, in marketing, and talent to further accelerate growth to make this business stronger in the years ahead.
I guess why does it need the EBITDA margin go up?
Because we will hope to drive future growth even faster through the whole cycle. Thank you. Anybody else? The lady at the back.
Hi, it's Haley Tam from UBS. Could I ask three questions, please? First of all, one for Michael, please. You've talked about seeing some share of OTC revenue growth coming from customers who had their first trade in a different product. Could you talk to us about what that portion is now and where you'd like that to be in the future? Second question on the IG Securities business and the revenue retention, the RtV, so return to volume curves. You talked about an improvement in that to see the curve shift further to the right over time, and I just wondered if you could give us any framework for thinking about that. You obviously mentioned as well that you were looking at improvements for how you might deal with new asset classes, flows, and market conditions.
Have we already had improvements that would mean that if you saw Q3 again, you wouldn't see the same sort of output? Then a third and final question for Clifford, just in terms of the guidance, can you give us any guide on how to think about the shape of EBITDA growth near term? Are we looking at more costs growth now and not necessarily an improvement in EBITDA margin in 2027? Thank you.
Haley, thank you, and thanks to UBS for hosting us here. Clifford will do what he wants on guidance, but Michael and Andy will be careful about future guidance. Do you want to take those questions in sequence?
Yeah. Thank you for the question. We haven't disclosed that number. I don't plan to. I think maybe just to add a little bit of color to your question, we balance carefully the opportunity to grow our business, but also making sure we have a sustainable business. We only cross-sell where it's appropriate to do so. Having said that, what's encouraging as we've expanded the jaws and the reach of the brand and accelerated our rate of acquisition, that rate of cross-sell has remained relatively constant, as have our appropriateness standards, which is important to say. We think as time progresses, as we further develop our product range, we can cross-sell in multiple directions, both from non-OTC and into OTC and vice versa, and we think that'll increase the stickiness and ARPU of our customers as well.
But that's also wanting to be cautious around how we guide, that there's various factors go into ARPU. It depends on how diverse your customer base comes as well. I won't give you specific numbers, but just saying it's held constant as we've expanded our acquisition.
On improvements in framework, I think I can answer both pretty much at the same time. The framework that we think about internally is that improvement in pricing, risk management, and hedging. As we improve pricing and hedging, we should see a better performance in the same market conditions. The risk management will, however, add that variability, so it is possible for the improvement in pricing and risk management to be overcome, or sorry, pricing and hedging to be overcome by the risk management side. But to answer you directly, if we saw Q3 again with what we're releasing in Q4 and Q1, we would expect a better outcome. As we add more risk strategies going forward, we would expect to be able to handle more market conditions more gracefully.
Thanks, Clifford.
Shall I pick up EBITDA? Haley, you will recall page 54, I think David was referring to that earlier, where over the period 2024 to 2026, we have effectively reinvested a little over half of cost savings and operating leverage into marketing. I think as a rule of thumb, we see opportunity to broadly offset them. We have got a growth in revenue, medium-term guidance of 10%+, and we would like to see EBITDA following that trend 10%+. You saw the paybacks and the lifetime value multiples from the team. We believe it is in our shareholders' interest to invest in that marketing and build growth, build value, and we think saving to invest is the right way to do it, hence our focus on holding our mid-40s EBITDA margins.
Now, we recognize there is a bit of a nuance to that in 2026, 2027, given we will be a bit south of that. Going forward, I would like to see us migrate back to the mid-40s and continuing to take cost out, and dial up marketing.
Thanks, Clifford.
Sure.
Hi, it is Ben Bathurst from RBC. I have questions in three areas as well, if I may. Starting with consumer and the single scale platform. It sounds like a seamless rollout was expected there. Who are you using for the technology, and should we think about that as a third-party outsourced arrangement, or have you invested in your own proprietary tech to deliver that? Secondly, on I think institutional, where would the White Label for a D2C opportunity sit within the new organizational structure? This has been, I think, decent source of growth for some of your traditional peers. Is it a market that you intend to compete more in actively, looking forward, and have you got the capability to compete there, do you think?
And then finally, just on financial reporting, do you have any plans to change how you report to meet the new structure you have outlined today? Thanks.
I think they are all very straightforward questions, Ben. Thank you. Do you want to, Michael?
Yeah. First question, we built the unified platform in-house. We focus our engineering efforts on the user experience and our core OTC engine. We are willing to partner selectively in areas, but fundamentally that platform is an in-house capability because we think that is a source of significant strategic advantage in years to come.
Just before you go, Andy, if you go back a couple of years ago, we talked about how there was both cultural and engineering work to be done on technology. How we had a complicated monolith addressing the over-the-counter customer base. Much of that has now been reworked. There is still work to go, but at the time, the sell-side asked us did we need to do a Hargreaves-type thing and carve out time and money, and we chose not to do that. And I say that also in the context of we can constantly invest in making this a better business as we go. That is what we have been doing, and that is what we continue to expect to do. Do you want to take the-
Yeah. Thanks, Breon. On the White Label side, we launched our first with Investec Prime Services in May. It is an area we see significant opportunities for growth. We think our right to win comes down to our reputation as a leading retail broker, our balance sheet. And with the retail flow, we have the fairly deep liquidity we are able to provide to White Label partners. It is still a fairly new product for us. We do expect to roll it out quite widely into geographies and client segments where we cannot build our own distribution.
Just to add on that, we have had people come to us, so licensed operators in different geographies come to us even since the announcement of the Underdog deal. Because we are now seen to have a broader product range than we have had in the past. And as you can imagine, there is demand even from our traditional institutional clients, there is now stuff we can do for them in crypto that we could not have done 12 months ago, and potentially an opportunity to do stuff in prediction markets as well. The third question, Clifford, was you, I think.
Yeah. So, Ben, we will continue to evolve our disclosure to reflect the change, principally the IG Consumer, IG Securities change. I am pleased with our disclosure to date. So we are committed to transparency, and also will provide as helpful as we can any transition because we know you and others want to model things. So I think we have done a decent job on that in the past, and I am happy to commit to doing that going forward. And frankly, we will welcome any feedback [inaudible] between now and early reporting in the new year.
Just to build on that, maybe going back to Haley's question, because I think it is relevant to cross-sell. Before pulling the divisions together under IG Consumer, we had three different leaders running local geographical businesses with slightly different strategies. That led to relative underperformance or outperformance in different places. I think now we have centralized decision-making there. Michael is pretty obsessive about how he allocates time and capital, and I think therefore cross-sell will be optimized going forward, which may look slightly different than how it looked a year ago. You will see that in the actives per asset class under the prior disclosure. Please, yeah.
Adrian Cattley from CapeView Capital. This is for Michael and Mike. As we are moving from a world of Google Search-led customer acquisition to a broader range, potentially LLM-led, one, how do you think about that? Secondly, are you seeing any change yet in consumer behavior of the people who you are either attracting or once you have attracted them, how they then trade?
If I may, Michael, maybe you can talk about what we are doing in the U.K. Mike, you want to talk about some of the work that Alex is doing in Chicago?
Yeah.
Actually, that is also relevant to the trading side because how we think about how customer behavior might change over time is something Andy worries about a bit as well. Do you want to go first, Mike?
Sure. I think it is a good question. I think when you start on the acquisition side, yes, we are seeing change in behavior across the board, and I talked a lot in my presentation about meeting traders where they are. That is part of that acquisition strategy, whether it is paid search, organic search, earned media, in our case, the education platform. You have to meet them where they are. That is if they are searching on ChatGPT, if they are doing Google search, however they consume their content. I think that is a broader concept of just always keep pace with where the market is going, and do not assume it is going to stay static. Then I think the way traders engage with the product is changing. That is another concept of we keep talking internally about meeting folks where they are. That is the mobile experience.
That is MCP servers, so they can create their own agent strategies, and that will continue to evolve, whether that is in agentic chat windows like ChatGPT and Claude, or they are writing their own scripts that are engaging with the MCP server. I think that is a continuous evolution that we just have to stay ahead of.
Yeah. Mike said a lot of what I would say. There are relatively similar trends, but a couple little builds. We have obviously rebuilt the capability in a team, so they are very progressive around these areas, and they have leaned into AI very heavily to power the work that they do. So they are naturally very, very curious around how clients and prospective clients engage with things like LLMs.
What is interesting about LLMs currently is there is a slight disconnect between search and then attribution of click and activity afterwards because there is not that many ads or that many links in it. So we have to really understand is what are they looking for, and how well do you reference against that? So we are onboarding tooling to allow us to do that, and we work very hard to build our credibility in the sources that LLMs draw their information from. So, for example, two years ago, IG didn't care about PR. We have the second-highest share of voice in PR in the U.K. And it is largely driven by the obsession that LLMs will draw referential points from media, and earned media particularly versus paid media gets a much higher weight. So everything we have done is curated through that lens.
Did you want to add anything or are you good to-
I will just add on the trading side, it is just an interesting evolution that we are monitoring of the flow that we see from clients will be more and more informed by large language models. So our market making is going to have to be geared towards market making for large language models as opposed to purely humans.
I had a follow-up just on actually the internalization. As you expand the range of markets, like prediction markets, how well do you think you are positioned to be able to internalize and capture the revenue from those compared to how the business has run historically?
That is going to be very geographic specific. In the U.S., very comfortable with what we have seen of Underdog so far, and I think, Michael, you would say that right now, you will correct me if I am wrong, but right now we see those as top of funnel, so market share expansion, but the core monetization engine will still remain the work the teams that Andy has reporting to him. We will see if opportunities come out of the prediction market stuff in the U.K. and further afield. We will focus on that if it is worth it. But right now, even if that just expands our brand, makes it a bit more relevant to a broader audience, that is already an exciting enough place to go. Help you with that?
Yeah.
Yeah. Just the man behind you there first.
It is Alex from KBW. Just two questions if I may. Just firstly, on page 35, your page with the pricing risk management hedging splits, that kind of right-hand side column around future sort of projects you are working on. Is there a sort of timeframe or quantum of benefit you can put around those pieces of work that you are doing? I am sure internally you have had discussions around why do them. Then sort of second piece on the same subject is, you have talked about kind of more short-term volatility, but then also kind of structural improvement in RtV over time. Over what timeframe should we expect to see that structural improvement come through? Because we do have some quarterly volatility in it, shorter term. Should we be judging this on a yearly basis, multiple years, just any kind of color you can provide, that would be helpful.
And just on the second subject. From the real work that you have done, are there any changes on thinking around how you prioritize marketing spend between geographies, product types, brands, et cetera? Any kind of thoughts there would be helpful too. Thank you.
Thanks for those questions. Andy, you happy with the first one?
Yep. Thanks, Alex. On the timeframe, the trading will be continually evolving, so we will be releasing new features and new strategies effectively as quickly as we are able to. We see the first iterations of the new strategies being released in Q4, Q1, and Q2. In terms of the impact we think they will have, I think I can speak to that in terms of we expect them to shift that distribution to the right. Then on the timeframe to look at it, I think annually would be how we would tend to look at it. But annually is the best way of looking at it, I would say.
Just to build on that, just because it is obviously we are encouraged by the work that Andy and the team are doing, but have one eye on page 37, the probability distributions. That is what we look at internally, right? So when we look at an initiative or a set of initiatives, we look at what is it doing to that. You can see, this is very macro, but you can see the blue line above the gray line on the right-hand side is a big area, but it is only modest on the left side. So we think that is a good trade. Those are all the initiatives we have done over the last 18 months. But when we look at initiatives, we look at it through that lens, and you can see, at least looking back, the probability of a lower RtV is lower as you shift it to the right.
But we are very sensitive to that and the sequencing of how we implement things.
To your second question, the guidance we have given today is for IG Group x Underdog. I think it is a legitimate question in the years to come, how do we best allocate capital in terms of marketing spend, primarily across geographies. But right now, given the paybacks we are seeing, we are happy to invest aggressively, and as we are funding that through efficiency, we are very happy to invest aggressively. Personally, I am excited about the diversification of revenue stream. When we look at search terms for trading phrases, that is cyclical based on volatility and other things, and seasonality of tax year seasonality. But the sporting calendar is just a completely different world. So we see diversification there that we think shareholders will benefit from in the long run.
I think, as we do presentations like this in the coming years, probably we will be able to give more precise answers to the relative trade-offs of capital allocation. But these are growing markets. We have momentum. We have got a team of, quite honestly, elite competitors that want to get on with it, and I think giving them the rope to get on with it is the right thing to do, rather than constraining them kind of artificially right now.
And just one quick follow-up. How quickly can you pivot that marketing spend? So if an opportunity does suddenly appear in one part of the business, how quickly can you redirect it to that part to maximize?
Michael, do you want to just talk about that in IG Consumer?
Yeah, so within the bands of IG Consumer, we optimize for returns, and it is more customer and geography. Product is a bit of a misleading because often customers are multi-product. So we think about customers holistically, and we think about optimizing for returns. The pace at which we can move marketing dollars is it is real time and often does not involve a human. We look for signals around value and demand, and our spend responds to it. So it is automated largely.
More generally, one of the benefits of the strategic review was it enabled us to talk to companies across industries and geographies. We have seen how businesses that went too brand-oriented or too digital-oriented got stuck when market conditions changed. So we want to bake that flexibility in, as he just suggested. We now have diversity by revenue line and geography, which puts us in a pretty unique position to build a resilient business over time.
One more point to add.
We're warming up here now, guys. Sorry about this.
Yes.
We've been here for a while.
Within consumer, I want teams to compete for capital, and they compete on the basis of returns. That's also baked into how we set up the culture of the organization. It's all about trying to drive the best outcomes, and those who will do will get more, and those who don't will get less.
Okay. In the middle there.
Hi, Simon Gergel from Allianz Global Investors. Just one really. Is the roadmap for IG Consumer converging with the roadmap for tastytrade? Or is it very different because of the fundamental derivatives backing of tastytrade? And if they are converging, at some point do they become one business ultimately?
Yeah, I will take that. They start in very different places, right? tastytrade is all exchange traded derivatives. IG at its core is over the counter. The customer doesn't necessarily understand the difference of that. I think if you go forward three, four, five years, we are already thinking about shared technology components. But if you go forward three, four, five years, you might possibly expect more of that, and possibly even brand convergence. But I think that is outside of the we have enough work to do today and tomorrow and indeed next year, not to worry about that. But as a North Star, you might expect greater uniformity of tech and brands over time. But that is medium to long term rather than shorter. Please, yeah.
Hi, Thomas Ryan from Davy Capital Markets. Just one if I may. With the prediction market launch in sports in the U.K., do you see that acquisition strategy focusing maybe on a more younger, potentially male audience? Or do you see an overlap in interests between prediction markets in sports and your core customer group?
I think the honest answer is we do not know. When we see the demographic profiles in the States for prediction markets, it is certainly younger, it is certainly male, certainly more mobile-orientated than our customer base. So that is attractive to us because ultimately it can help us extend our brand into a broader audience. The way we will manage the business in reality is that we will, the same as we do in everywhere else, we will look for return, we will look at response, we will look for value, and we will optimize for that. So part of being early and innovating is that you have to work your way through those points, but we are quite confident we can do it.
Okay, thank you. I'll come to you in a sec.
Thank you, Breon, for that. I've got two, please. I'm Melwin Mehta from Sterling Investments. My first question was historically and even now, between retail and institution, what portion of our trades do we internalize before it hits the market? What's the plan going ahead? The second question is, in terms of changing this interface, I'm specifically speaking to oldie goldies clients here of yours, how do you think they'll react to an IG app or a system that looks different from the past? Thanks.
I don't think we're going to go to percentage of trades that's internalized. It's something we think about. What?
I'm going to answer the second.
Yeah. I just do not think there is value in that. We are pretty obsessive about active customers. We are pretty obsessive about retention. We are pretty obsessive about giving the customer what they want. They do not always value the nuance that we might think of. Do you want to go to that? Because it has relevance in cash equities as well, yeah.
Yeah. The way I was going to answer your second question was, the approach the team has taken, it has been built in customer feedback, and the whole purpose and design of the product is so it gracefully scales for different use cases, different types of customers. Our existing clients have been heavily involved in that process. The way we de-risk this from a business perspective is that we migrate in batches. We do not migrate in one single big bang. We bring customers on the journey with us, and so we build in feedback loops on the way as well. We are confident this is a relatively well-trodden path within e-commerce. We have got an experienced product and engineering team. We are confident we can work through that journey with customers. But we think we will deliver a better experience, broader, faster, more streamlined, better UX.
We think clients will respond well to it. So far, as I said in the presentation, the signs are encouraging. We are not going to put any numbers around that, but they are encouraging.
This side here.
Hello. Hi, I am Kanzila from Peel Hunt. I have one question on the revenue side. For example, in Q3, the revenue on the U.K. direct platform, if you look at it from year-to-year, it fell about 45% to about GBP 7.5 million. Whereas if you look at the asset side, the assets on that platform grew by 34% to GBP 9.3 billion at the end of September. If you analyze the quarter, that takes the revenue yield, for example, on assets from roughly 79 basis points to about 32. Is it possible, from a modeling perspective, if I have to model it, is it possible to split that decline between, let's say, the interest pass-through and the trading activity? Do you expect the structural yield to settle in the long run?
I might ask Martin to sit down and just go through the model part of that question with you later. Do you want to just address that at a strategic level?
Look, thank you for the question. I appreciate how you have zoomed out and identified that AUA is up, and particularly in IG brand, the active client base is also up. The underlying health of the business is good. As I referenced earlier, I think it is also important to understand that stockbroking has much more value beyond the direct revenue we generate from it. It actually feeds our OTC business through the cross-sell mechanism we talked about earlier. There is part of your question that is very straightforward to answer. It is actually answered through the disclosure. Net trading revenue excludes NII, so you should be able to see the portion that is related to interest pass-through and interest rates and cash balances. The remaining part to explain Q3 performance, there are a few different factors going on.
The first is that most revenue we generate from stockbroking is based on transactions. It is principally monetizing international equity transactions through an FX charge on both brands. In Q3, as there was this concern around the valuation of AI and tech stocks, we saw the shift towards domestic equities. I cannot really give you guidance as to how that will play out over time. I would not be doing this job if I could. But ultimately, I am not concerned it represents a sort of structural weakness in the franchise. One other factor to call out within the quarter, sorry, two others. We made some pricing changes, most of which we are happy with, one of which we reverted. That was a test to establish price elasticity of demand. Secondly, in Freetrade's case, we are booking incentives in the revenue line, and we have been aggressively driving AUA growth.
We manage that incentive through the returns framework we talked about more broadly around paybacks and LTV to CAC. But it does have the impact of short-term depressing revenue growth, because we wouldn't have had the same factor in previous years.
Okay. Thank you. I possibly have some calls online if there's nothing else in the room. Sorry, let me take that question there, and maybe you can queue up if there's someone online. Thank you.
Yes. Sorry. David McCann from Deutsche Bank. Just come back for a second bite of the cherry, if that's okay. With just a couple more, probably for Clifford. Curious, you mentioned obviously the redomicile to the Channel Islands, and this will mean you no longer have to abide by the regulatory capital requirement of the U.K. for the group as a whole. Just curious as to how much capital that move will actually free up for the group as a whole? And then I guess the follow-on more strategic question that goes beyond this, are you done with larger M&A now? Is the group basically the shape that you now want it, or is there something else that's perhaps missing in the pipeline?
I'll take the second one, but do you want to go to the first one?
I'm not going to quantify it, but I would say it's meaningful, it's material, and it's quite a change for the group in terms of getting the governance sorted across the various layers. We obviously looked at it very carefully. There are a number of peers out there who've done similar redomiciles, so I'll take a look at that. And we'll get back next year where we said that we would expect to resume buybacks, and we can start putting numbers on things at that point.
Thanks, Clifford. To the second question, I don't think there are gaps in the group. But this is a very dynamic industry, and scale matters. I think there will be opportunities in the years ahead, and I think other operators will realize that one needs the fullest set of products and that one also needs scale. That's part of the rationale behind investing in the tech and team that we have today, because I think it is inevitable that consolidation will happen at some stage. But specifically now, I think post a cash equities acquisition, post a crypto deal in a number of geographies, and the product capability and mindset that Underdog brings, I don't think of us in terms of having obvious gaps that we need to remediate. Are there any questions from online? Who's got the mic for those?
We do for audio questions, and we do have one hand for questions coming from Hal Potter of Bank of America. Hal, please go ahead.
Hi, Jim. Thanks. A quick question, and just a couple from me. First of all, on the RtV, part of that sequential decline that we've seen over the last few calls has been driven a little bit by bedding in or a kind of learning process as you started to roll these initiatives out. Or is it purely the challenging market? On those challenging markets, could you just give us a sense between your asset classes, which environments are more or less challenging? You've called out equities and an equity index in the presentation. Could you talk to any others? Then finally, on prediction markets, could you just talk through your assessment of your potential competition in the U.K.? Obviously, gambling markets are in a different shape in the U.K. versus the U.S. So any color there at all, I think would be helpful. Thank you.
Sure. Andy, do you want to have a crack at that, and then Michael finish up?
Sure. On the asset mix, let me start with the first part of that question. Across this year and these quarters, I think there have been different reasons for the relatively RtV in Q1, reasonable RtV in Q2, and then the low RtV in Q3. Part of that is a product mix challenge as we, particularly in Q1, trade more commodities. We have a structurally lower RtV in commodities as the spread is generally wider, meaning it costs us more to hedge, and there's a little bit more volatility in it before we're able to hedge. On the asset mix more broadly, I won't go through each individual asset class. Generally, anything with low volatility and a range of markets will be difficult for us to manage or will be the worst conditions for the current strategy. I think over time, we are always learning.
We will constantly learn. I would put it more down to market conditions, but it allows us to learn from those market conditions in order to improve in the future.
Thanks.
On prediction markets, when you think about the range of markets that these platforms are making available, you could create a bit of a laundry list of potential competitors across a whole spectrum, from gambling operators all the way to financial service providers in the U.K. And truthfully, we won't know what the mix will look like until after we've launched a product and we've established demand. But what I think you're really competing for is space in the consumer's mind. Ultimately, it's a mindset around consumers who want to express a view on the world around them. So it's competing within that space, really, as opposed to saying it's competitor X or competitor Y, and the economics look like Z or whatever. It's much more specific around a consumer mindset.
Thanks, Michael. Are there any other questions online?
Yes, we do have another one. We have it coming from Ian White of Autonomous Research. Please go ahead, Ian. You are unmuted.
Hi there. Thanks for doing this presentation. Thanks for my question. Just a few follow-ups from my side, please. Just firstly, in markets like the U.K. and continental Europe, can gambling, CFD trading, and financial investing comfortably sit within one franchise? Do the regulators think these products are for different types of customer, and if they do, then how do you navigate that from a marketing customer acquisition perspective? That is question one. Just checking on Slide 23 of the payback figures, can you help with some of the definitions there? Is that CFD customers and stock trading, for example, taken together?
On Slide 64, just to be clear, is that trailing three-year measure, that four-to-one ratio? I guess presumably we do not know what that ratio is yet for the newer cohort that are being recruited under the increased marketing investment you have made in the business for at least the next. So I suppose question two, just clarify that, please. Just finally, does the positive value for money perception that you set out on Slide 28, does that actually mean lower prices overall, or is it simply that you have tailored things in a way that the customers perceive better value for their price or whatever, but that is not the case? Thank you.
Cool. You might take them in reverse order, I think.
Yeah. Okay, so the value perception is straightforward. What that means is that customers feel we are giving them, I think it's good or very good value for money. We asked them in a survey. It's not a reflection of us reducing price. It's a reflection of what value consumers perceive we are giving to them as a service provider to them. They are essentially saying they are happier with the experience from a value for money perspective. The second one is around LTV to CAC, and there's sort of multiple questions in it. The first bit was, is it blended? Yes, it is blended, and we obviously think about capital allocation in different ways. Ultimately, as I was saying earlier, our customers also blended.
A lot of our customers cross over between different products, so also we're quite thoughtful around different sources and what the returns are, and we optimize for that. I would be somewhat discouraging of people being very focused around product-level paybacks, where it's not appropriate to do so. The second bit was around, is it 36 months trailing or forward-looking? It's forward-looking. Ultimately, some of the investment we've been making, which I referenced in the slides, is around building out the capability, having very high-quality data science models to be very confident in our customer lifetime values. We track cohorts very carefully, and we've been doing this in the U.K. for the last two years. Whilst there's an element of it being forward-looking, it's also quite significantly grounded in quite a long time of data as well.
The other point as well is that we operate at very strong unit economics. Whilst it's important for us to be accurate around our modeling and our forward look, in the end, we're quite a way away from the place where I would be uncomfortable with our paybacks. I think we're more marginal. I'd be more concerned about being ultra-ultra-ultra-diligent on our forecasting capability. The last question was around whether, effectively, gambling products and financial service products can sit comfortably together. I think that's something that we think about, and perhaps it is something that regulators think about, so we should address that bit second. I think customers don't always care as much as we think.
I think we've seen that play out in America, where some very successful online trading platforms have launched a heavily sports-orientated prediction market product, and indeed, in one case, it has been called out as the fastest-growing vertical this business has ever launched, and they've been very happy to do so. Historically, IG has had a gambling license in the U.K. There are competitors who have gambling and financial licenses still in the U.K., so I think there's precedent that regulators will accept that as well. I think what regulators will look for is ensuring that we are very thoughtful around things like target market and comply with all of their obligations. To date, I have not heard any expression, despite engaging with multiple regulators in this country, that they're uncomfortable with us doing both side by side.
Yeah. I mean, Ian, Michael's answered the question, but you referenced continental Europe in particular. I think there will be culture and nuance to this on a geography-by-geography basis, but I think Michael has nailed it. The consumer wants to express opinions or express views across multiple asset classes, and that now increasingly involves live sport. Historically, companies like ours have advertised heavily in sport. We are very respectful and quite dependent on the good relationships we have with regulators. Ultimately, it's the consumer driving us in this direction, and we have to be attendant to their wants and needs. Is there any other questions online, or can we. There's no other questions online. Are we close to done in the room as well? Bertie from Goldman wants to go back to work. So thank you to everyone for your time today.
I hope you can see that we're excited about the next stage of growth, and we look forward to updating you on our progress as we progress. Personally, I think the opportunity ahead of us today is more clear and more obvious than it has been. So thank you for your support. We're looking forward to going back to work, but follow up with us through usual channels if you'd like some more detail for models or just to chat. Thank you all. Thanks to my colleagues in the room and the broader team who've done an enormous amount of work to make this pretty seamless and relatively painful over the last couple of weeks. Thank you all.