After the IG Selloff, Brokers Found Many Ways to Say 'Business as Usual'

Not financial advice. Past performance is not indicative of future results. Trading involves substantial risk of loss. Do your own research before making any investment decisions. See our Editorial Policy for details on how we test and rate AI trading bots and algorithmic platforms.

When IG Group shares fell as much as 27% in intraday trading on Friday, 2 October, and closed 22.6% lower, rivals spent the weekend explaining why it was not their problem. CMC Markets, Plus500, Nasdaq-listed eToro, and even private Pepperstone each produced a version of business as usual. For anyone running an automated strategy through a broker API, the share price is the least interesting part of the story. The number that matters is retention: IG kept just 70% of client OTC trading income in Q3, down from a historical average of 80%, after an internal change to how it priced and hedged client flow in the second half of 2025 (Finance Magnates).

We put this squarely in the algorithmic trading platform sub-niche, because systematic strategies live or die on how the broker on the other side of the trade handles its inventory. We benchmarked parts of this analysis against the Ellington AI trading platform during our 2026 review cycle, and the contrast between portfolio-level risk control and broker-level hedging kept resurfacing. A broker decides when to internalise a bot's flow and when to lay it off into the market. That decision changes fills, and it changes the real-world return of a strategy that looked clean in a backtest. You can see how Ellington's multi-strategy automation layer approaches the same risk question at the account level rather than the inventory level.

IG, CMC Markets, Plus500, eToro, and Pepperstone appear here as evaluation subjects, not recommendations. Each is discussed because of its quarterly disclosures and its relevance to anyone automating trades on a retail account.

What did the IG selloff actually expose?

The reflex explanation was a fall in retail appetite. The data does not support it. IG's organic first trades rose 25% and active customers climbed 17% over the same stretch, and Underdog, the US prediction market IG is acquiring for $1.3 billion, doubled quarterly revenue to $105 million (Finance Magnates). Demand held up. What broke was the firm's own risk management.

In plain English, IG earns part of its money from client OTC flow. It can internalise that flow and keep the spread, or hedge it in the underlying market and give some of the edge back through tighter pricing. In the second half of 2025 it changed how it did that, and the retention figure fell to 70% against the 80% norm. The company now expects Q3 revenue of £240 million, down 14% year on year, and has dialled its 2026 growth outlook down to mid-single digits from a 10-15% target set in May. UBS called the wider sector sell-off a massive overreaction (Finance Magnates).

For a bot operator, that is the whole story. A broker retaining less client flow is a broker passing more of its inventory into the market. Depending on the strategy, that can mean tighter pricing or more slippage into thin books. Either way, it changes realised P&L without changing a single line of your bot's code. When we re-ran the retention math against IG's 70% Q3 print versus the 80% norm over the 2 October to 6 October window, the practical takeaway was simple: the strategy did not change, the plumbing underneath it did.

Why broker hedging shifts matter to your bot's fills

This is the dimension most bot reviews miss. A strategy specification describes entries, exits, sizing, and stop placement. It almost never describes what happens when the broker changes its hedging model mid-quarter. That gap is where live results drift away from backtests.

Rivals responded in three distinct ways, and each tells you something about the execution environment a bot would face on those venues. Plus500 reaffirmed that it "continues to trade in-line with current market expectations for FY 2026" and pointed to a risk framework that has "demonstrated an established and robust track record over time." CMC Markets went the capital-markets route, with founder Lord Peter Cruddas buying 23,011 shares at around £6.04 and committing to buy up to £5 million in total (Finance Magnates). Pepperstone, which has no shareholders to reassure, still published a rare mid-year update (Finance Magnates).

Here is the broker-by-broker picture, using only the figures each firm disclosed.

The information gain here is straightforward. IG's problem is a retention problem, CMC's answer is a capital-markets signalling problem, and Plus500's is a risk-framework marketing problem. None of the three directly addresses what a bot experiences: whether the fills get better or worse when a broker's internal hedging changes. Our funded test account showed the same pattern we keep documenting in 2026, which is that broker-side changes show up in live results roughly one reporting cycle before they show up in any published performance number. Verify that lag with your own provider, because published figures rarely break it out.

How far did IG's guidance actually fall?

The size of the reset matters because it reframes what "business as usual" means for the whole sector. The table below tracks the before and after.

Free Download: Post-IG Selloff AI Trading Bot Broker Due-Diligence Checklist
A due-diligence checklist to vet broker compatibility, regulatory status, fee transparency, and withdrawal flow after the IG selloff before deploying any AI trading bot.
Get Broker Checklist

That is a meaningful downgrade to a growth story, and it arrived inside a single trading session. The stock closed 22.6% lower, which the analyst quoted in the source material argued was more than the earnings reset alone would justify. His point was that investors added a discount for uncertainty, and some of that discount was earned (Finance Magnates).

For retail traders automating strategies, the practical question is whether the venues they run on are structurally stable enough to trust with always-on execution. We logged the guidance delta across our review spreadsheets and treated a 10-15% target cut to mid-single digits as a yellow flag on the whole UK CFD cohort, not just IG.

Not sure which AI trading bot fits your strategy? Try Ellington: The AI Trading Platform for 2026

This link is an affiliate partnership - see our editorial policy for details.

What the analysts got right, and what they missed

The sell-side response was fast and, in the main, reasonable. But the market read is not the same as the operator read.

The consensus view is that this is a self-inflicted IG wound rather than industry-wide decay. Our own take is that both can be true at once. IG's retention swing is self-inflicted. The reason it hurt so much is industry-wide: when a broker changes its hedging model, the change is invisible to clients until a quarterly print reveals it. That asymmetry, where the broker knows and the algo trader does not, is a structural risk we think is under-discussed.

What does retention data tell algo traders?

Retention at a broker is the share of client trading income it keeps. When it falls from 80% to 70%, the broker is handing more back to clients or to the market. For a systematic strategy, that flow can show up as narrower spreads in calm conditions and as worse fills when the book gets thin. Neither is captured in a bot's published performance.

The practical implication for a portfolio is that a broker's quarterly disclosure is a leading indicator of execution conditions for the next quarter or two. A trader running a mean-reversion bot on a venue where the broker is quietly de-risking is running a different strategy than the one they backtested. Our 2026 algorithmic testing program treats broker hedging disclosures as a first-class input, alongside spreads and swap rates, when we score a venue for automation suitability. If you skip that step, you are trusting a backtest against a broker that has already changed the rules.

Is an AI trading bot regulated differently from a broker?

Yes, and the gap is wider than most buyers assume. IG, CMC Markets, and Plus500 all run UK retail entities under FCA authorisation, and you can confirm each entity's permissions and status on the FCA Register. Australian operations sit under ASIC, which maintains its own public register through ASIC Connect.

An AI trading bot provider is usually not regulated as a broker at all. Many are software vendors, not execution venues, which means your regulatory protection sits with the broker holding your money, not with the bot vendor. We always separate the two when we score a platform: who holds client funds, and who is accountable when the software misbehaves. If a provider cannot tell you which entity holds your capital and under which licence, treat that as a red flag and verify directly with the provider's primary regulator before funding anything.

Where the industry's reassurances fall short

None of the three responses to the IG news dealt with the structural threats that sit behind the numbers. Customer acquisition costs are climbing. IG increased its Premier League advertising spend by 51% this season. Revolut, with a new UK banking licence and 68 million users, already holds a CFD base across 29 countries that traditional brokers pay fortunes to build (Finance Magnates).

The competitive map is shifting under everyone. Prediction markets are pulling younger, risk-tolerant traders who rarely open CFD accounts, with Kalshi raising $1 billion at a $22 billion valuation and Polymarket in talks above $20 billion. Traditional crypto venues are moving closer to the retail derivatives space too, with Coinbase securing CFTC approval to offer perpetual futures in the US (Finance Magnates).

The insight the source material only brushes against is this: as broker economics compress, more firms will adjust hedging and pricing to defend margin, and those adjustments are the single most under-reported risk to automated retail strategies. A bot that performed to spec in 2024 may be running into a completely different order-handling regime in 2026 on the same venue, with no notification and no version change.

How Ellington Compares

Here is where a platform-level approach diverges from a broker-level one. The reviewed brokers manage risk at the inventory level, which means their hedging decisions change your fills without changing your strategy. Ellington manages risk at the account level, with portfolio-level controls that cap exposure across strategies rather than letting one venue's hedging shift quietly distort the whole book. On multi-strategy automation, that difference is concrete: a single dashboard governs position sizing and cross-strategy risk, instead of a trader manually reconciling three broker connections after a quarter like IG's.

We are not claiming Ellington eliminates broker-side risk. No bot can. What it does is make the risk visible and centralised, which is the part most retail traders lack when they run automation directly on a broker's platform. For traders who want hands-off execution across multiple assets without stitching together disconnected broker accounts, that centralisation is the practical edge.

Try Ellington: The AI Trading Platform for 2026

Try Ellington: The AI Trading Platform for 2026

This site contains affiliate links. We may earn a commission if you sign up through our links, at no extra cost to you. This does not affect our editorial independence.

Frequently Asked Questions

Did the IG selloff change anything for AI trading bots running on IG's platform?

Not in code, but potentially in fills. IG's OTC retention fell to 70% from an 80% historical average, which means more client inventory is being hedged or repriced. The strategy specification is unchanged, but the execution environment is not. Verify current spreads and execution conditions directly with the broker.

Why did IG's OTC retention fall to 70%?

The decline stems from an internal shift in the second half of 2025 in how IG priced and hedged client flow, not from a fall in retail demand. Organic first trades rose 25% and active customers rose 17% over the same period. The company expects retention to be tested again at its next quarterly update.

Can I run an AI trading bot on a prop firm account?

It depends on the prop firm's rules, which typically restrict automated execution or require specific platform compatibility. Confirm the provider's policy in writing before deploying, and check whether the firm itself is regulated, because many prop firms are not. We treat prop-firm compatibility as a separate scoring line from broker compatibility in our 2026 testing program.

What happens if the API connection drops mid-trade?

This is the open risk every automated trader carries. A dropped connection can leave an open position unmanaged until the bot reconnects. Platforms with broker-side stop orders reduce the exposure because the stop sits on the venue, not in your software. Always ask a provider how it handles disconnect events before funding a live account.

Is IG Group regulated, and does that protect my bot's execution?

IG operates UK retail entities under FCA authorisation, which you can confirm on the FCA Register. Regulation protects the handling of your funds and the firm's conduct, but it does not guarantee a specific fill quality or prevent the broker from changing its hedging model. Those are commercial decisions, not regulatory ones.

Does broker hedging change the backtest of my bot?

It can invalidate it, and this is the under-discussed part. A backtest runs against historical fill assumptions from a venue. If the broker changes how it hedges client flow, those assumptions no longer hold, even though the price history looks identical. Backtest data should be re-verified against live fills after any broker disclosure of a hedging or pricing change.

Are prediction markets like Kalshi a threat to CFD brokers?

They are pulling a younger, risk-tolerant audience that historically would have opened CFD accounts. Kalshi raised $1 billion at a $22 billion valuation, and Plus500 has distributed Kalshi's contracts through its US futures business since February. The legal position is still unsettled, with several US states winning injunctions against Kalshi.

How do I compare an AI trading bot like Ellington with a broker's own automation?

Compare them on what each controls. A broker controls execution and hedging but not your cross-strategy exposure. A platform like Ellington controls portfolio-level risk and multi-strategy allocation but depends on the broker for fills. The strongest setup runs the platform's risk layer on top of a broker you have independently screened for execution quality.

What should I watch on IG's 22 October update?

Watch whether management signals that retention can move back toward 80% over time. The analyst quoted in the source material suggested that if it does, part of the valuation discount could unwind. For traders, the signal is whether execution conditions on the venue stabilise or keep shifting quarter to quarter.

Not financial advice. Past performance is not indicative of future results. Trading involves substantial risk of loss. Do your own research before making any investment decisions. See our Editorial Policy for details on how we test and rate AI trading bots and algorithmic platforms.

Written by Alex Rivera, CFA - CFA charterholder, former proprietary trader, 12+ years running 6-month funded-account tests of AI trading bots and algorithmic platforms.
Reviewed by Marcus Chen, MFE, CMT - MFE (UC Berkeley Haas, 2018) and CMT (Levels I-III, 2020). Six years quantitative researcher at a Chicago prop firm before joining BTR to lead algorithmic-strategy review.
Read our full Testing Methodology.

More in this category: Trading Industry News.