London Capital Group (LCG) is making the transition from being a spread betting and contracts for difference (CFDs) provider to becoming an introducing broker. As part of the deal, the LCG has tapped its UK-based rival, IG Group, as its first third-party trading platform provider, the company confirmed to Finance Magnates on Tuesday.

LCG Becomes Introducing Broker

Under the new arrangement, LCG said it will focus on providing its clients with ‘boutique’ and relationship management services while IG Group and other ‘leading third party platforms’ that will be onboarded in the future will provide the platform, pricing and execution services.

However, the transition plans have been underway for months. In January, the company as part of ‘major changes’ to its business committed its operations to a new team headed by Dave Worsfold, Matt Basi and Stuart Dorward as Chief Executive Officer, Managing Director and Head of Sales and Trading, respectively. In the following month, LCG announced that it has signed a new partnership with IG Group to leverage its technology. It also said it will engage other “industry leading providers” as part of “the new evolution of LCG.”

“By partnering with IG for the technology, pricing, execution, on-boarding and holding of client money, we are free to re-shape the business to focus on service and relationships,” Basi told Finance Magnates. “We’ve re-staffed the business accordingly and are really excited about the team we’re building, all of whom have deep experience and we’ve worked with before.”

LCG Says Trading Industry Is ‘Overcrowded’

The switch in business model comes as LCG UK, which is owned by Charles Henri Sabet who controls Swiss firm Flowbank, suffered an 86% decline in revenue during fiscal year 20221, owing in part to the UK’s exit from the European Union (EU). The company was previously a part of the London Capital Group Holdings until its acquisition by Sabet who separated it from the holdings company that went into liquidation.

Following Brexit, LCG lost its passporting rights for operations in the EU region and focused solely on the UK client base. However, its sister entity LCG Capital Markets Limited is based in Bahamas and operates globally with authorization from the offshore regulator.

“Our view of the sector is that [the trading industry] is over-crowded with firms competing to be counterparty to client trades and [to] risk manage their flow,” Basi explained. “We feel that for clients to get the best outcomes, firms should focus on the value they can add to the client trading experience.”

LGC Gives Deadline for Account Closure

Meanwhile, LCG has said its clients can open and close their trades, make deposits and withdrawals until June 30, 2023, after which the depositing of funds and the opening of new positions will be blocked. In a message sent out to clients, the spread betting and CFDs provider noted that clients will be given another four-week grace after the deadline, to close out any existing positions on their LCG accounts.

Confirming the message to Finance Magnates, Basi noted that the step is to help give its clients “appropriate time/notice to make the transition and to handle the business change in an orderly, professional way.” He added that “the next tranche of clients [will be contacted] in due course.”