IG markets are a major supplier of trading products and a sponsor of Kryptografen. On their international platform, customers can buy and sell products such as the S&P500, Oslo Børs, DAX, EUR / USD, Brent oil and cryptocurrencies.
A tool to reduce risk
Due to the good cryptocurrency trading opportunities, especially now during the corona crisis, Kryptografen has interviewed Adam Dahlberg, IG‘s Premium Account Manager. He is responsible for the Norwegian region, but works out of the Nordic headquarters in Stockholm. Adam holds a Masters degree in Financial Economics, and has worked for several years with foreign hedge funds primarily in the derivatives market.
In recent weeks, the financial markets have experienced a deep correction as a result of the corona virus and an oil price war between Russia and Saudi Arabia. This has led to new records in volatility estimates, measured through the VIX index. Increased volatility is a sign of fear and uncertainty, but at IG the customer base has increased over the past week.
“It’s been a long time since we’ve seen such a large influx of new customers. Many people don’t believe it’s true, but it has a very logical explanation for this. At IG you can short, just as easily as going long. This means using that people are using the IG platform to hedge existing positions, or bet on a decline.”
“Norway, like Sweden, has introduced favourable tax rules on what is called Equity Savings Account (ASK) in Norway and Investment Savings Account (ISK) in Sweden. Investors often have long mass stocks and mutual funds. The limitations are that you cannot put CFDs or short-position ions in a stock savings account. That means they go to the IG and shorter stock indices in bad times, to hedge their positions on the stock savings account.”
This is how customers are positioned
IG markets defines itself as an online broker with approximately 180,000 customers on a global basis. The abbreviation IG stands for ‘Investors Gold’ and was started as early as 1974. The purpose at that time, and today, is to give individuals the opportunity to trade advanced products. At that time there were futures contracts on gold, today you can trade over 17,000 products around the clock. The products consist of stocks, indices, interest rates, oil and cryptocurrency.
According to Adam, IG‘s ‘value propositions’ have become more relevant with the stock market decline. Many people, as mentioned initially, want to short the market, but more people also want 24-hour trading. When the market moves as fast as it does now, it is risky to wait for the opening of the stock exchange.
Another popular feature is customer sentiment indicator. It’s basically a ‘fear and greed’ barometer, which shows how customers are in total positioned in a product. For example, if you go to Bitcoin, ‘67% of IG’s customers are long Bitcoin’.
“We know that many appreciate that we show customer sentiment. For example, the impact was great when Tesla rose sharply before the corona epidemic. Then our customers could look at this indicator that the euphoria had taken over. Our market analyst Erik Hansén also uses this ‘fear and greed’ indicator in his morning newsletter which he sends to all our customers in the Nordic countries.”
King Solomon and Jørgen Hattemaker
According to Adam, their is a large spread on people who trade on IG because they offer a such a large range of different products. Many traders are attracted to good charting, gearing and fast execution, others want access to exotic products all over the world.
“The larger traders often have several brokerage relationships, but the feedback to us is that hedges are easiest to do at IG even though they have shares elsewhere. There is also a big difference between different countries. In the UK, they trade a lot of individual stocks because there is a tax on buying shares in the ordinary market. This is avoided when you trade CFDs at IG. In the Nordic countries, index products such as the S&P500, DAX and oil are very popular.”
IG was early on offering trading in cryptocurrencies such as Bitcoin and Ethereum. Customers who choose to buy Bitcoin from IG do not take ownership of physical Bitcoin, but a CFD that reflects the Bitcoin exchange rate. This eliminates the risk of hacks and lost passwords. At IG, you can always access your account by legitimizing oneself.
“Bitcoin and cryptocurrency are very popular with our customers in the Nordic countries, and is increasing in the rest of Europe. More and more people see it as a natural part of the portfolio. We have even seen larger banks and institutions that have investigated the possibilities of trading cryptocurrency with us.”
Customers are optimistic about Bitcoin
At the time of writing, 87% of the positions on IG‘s Bitcoin contract are long positions. That means customers are optimistic and may have taken advantage of the big fall this weekend to buy more bitcoins.
“The fact that customers have different views and positions is very positive. In such products, we see that customers’ long and short positions are mutually exclusive, which means that IG does not have to enter the physical market to hedge its net exposure. The way it works is that we also pay the customers to take opposite positions in a skewed book. For example, you now get 7% annual interest on short bitcoin overnight, because there are too many long positions. This allows customers to earn extra income on their hedge.”
IG has just launched Turbo24, which is a listed turbocharger and can trade 24/5 directly in the graph. Here, the risk is limited from the point of purchase, and you can make good money if you hit right. According to Adam, IG will soon roll out more products in this category. Maybe a Turbo24 on bitcoin will come someday.