Britain’s IG Group said Thursday it had agreed to buy online brokerage Tastytrade in a $1 billion deal driven by the boom in options trading by retail investors in the U.S.
Amid what one analyst has called a “retail option-trading frenzy,” more than 7 billion stock options changed hands in 2020, up almost 60% from the prior year, according to Options Clearing Corp.
The market has surged in part because of the coronavirus pandemic, with many locked-down Americans turning to online options trading.
Tastytrade, which was founded a decade ago, now has more than 105,000 active trading accounts and some 900,000 unique registrations, while its YouTube channel boasts 206,000 subscribers and 8 hours of live programming a day.
“I am thrilled to welcome Tastytrade to the IG Group family,” IG CEO June Felix said in a news release. “This acquisition will materially expand and scale our business in the U.S. and see us further diversify into the exciting high growth market of U.S. retail options and futures, a market which is adjacent to IG’s core retail trading skill set.”
Felix noted that the U.S. market has more than 1.5 million retail traders and is the largest derivatives market in the world.
IG provides an online platform for trading derivatives, offering products that let individual investors bet on whether stocks, foreign-exchange rates, gold, or cryptocurrencies will rise or fall. In the U.S. it already owns Nadex, a small exchange for binary options.
Under the terms of the deal, IG will pay Tastytrade shareholders $300 million in cash and IG shares valued at $700 million. IG stock fell 7.1% to $11.71 on Thursday, with analysts at Canaccord Genuity saying the deal price was “very punchy.”
“The question of increased regulation in the U.S. retail futures and options market” will be “at the forefront of investors’ minds,” the Financial Times said.
Tastytrade’s founders previously ran Thinkorswim, a brokerage firm that was acquired by TD Ameritrade for $606 million in 2009. “We are excited to work with IG to make derivatives trading more accessible for retail investors around the world,” co-CEO Kristi Ross said.