Irish I(G)s Are Smiling

Ireland is often held up as an example of a modern economy, partly due to a strong financial services sector that has grown on the back of a low tax base and firms that moved away from London after Brexit.

However, only two firms have loomed large over the Irish brokerage market for the last century and a half – Goodbody and Davy.
Goodbody received its trading licence in 1874 and owned more than a quarter of the Irish stock exchange until as recently as 2018. Three years later, it was acquired by Allied Irish Banks (AIB).

IG’s UK Managing Director, Michael Healy
Michael Healy, IG’s UK & Ireland Managing Director, Source: LinkedIn

Davy Group – which next year will mark a century since its first trade – has dominated the Irish stock exchange for decades, being responsible for most of the funds raised. It is owned by Bank of Ireland, one of the big four domestic banks alongside AIB, Permanent TSB and Ulster Bank.

The ‘new kid on the block’ is IG, whose UK & Ireland managing director has told Irish consumers that they can now access thousands of stocks and ETFs commission-free and at an overall cost that is a fraction of that charged by the incumbent firms.

Michael Healy describes the product as the joint cheapest online option in the country, stating in an interview that the Irish market is “chronically underserved” and that the incumbent operators are providing “really bad value to Irish customers… very limited customer service, very expensive pricing”.

IG sees itself as appealing to customers who have avoided the neobrokers with limited track records and are unhappy with the fees charged by the established firms. It will hope to benefit from the reduction in the tax levied on investment in ETFs announced in last month’s Irish budget.

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Is Strategy Taking Credit for Nothing?

For most companies, a B– credit rating would lead to quick calls to major customers and suppliers to assure them that the business was not about to collapse. It shows that an issuer or borrower is speculative and vulnerable and carries a high risk of default, but can currently meet its financial obligations.

So which senior leader was keen to post this news on X? That would be Michael Saylor, executive chairman of Strategy (formerly MicroStrategy), who has faced sharp criticism in recent months as the stock of the company he co-founded has dropped sharply and, in particular, underperformed Bitcoin.

Standard & Poor’s describes Strategy’s high Bitcoin concentration, narrow business focus, weak risk-adjusted capitalisation and low US dollar liquidity as weaknesses that are only partly offset by its strong access to capital markets and careful management of its capital structure, including having no maturities in the next 12 months and financing its business mainly with equity.

The agency expects the company to continue to fund payments of its convertible debt and preferred stock dividends through the issue of debt, preferred equity and equity, raising the prospect of one liability being funded by another.

Supporters of Strategy’s strategy argue that it is too simple to compare the company’s performance to that of the cryptocurrency it follows and that its valuation was previously too high.

One chief investment officer suggests that this is similar to what has happened with a range of engineered products.

He notes that the underlying assets do not produce cash flow, but adds that the value of a loan rarely repays much above par. His view is that on the macro front, Bitcoin is being driven by the same flow of capital into alternatives to US dollars.

As the firm’s securities are tradable and the underlying is observable, he suggests that it may be time to accept that Bitcoin treasury companies have learned how to build many layers of leverage and that there are chances for those who can break the securities down into the sum of their parts.

Taking Stock of European Equity Markets

A recent report from capital markets think tank New Financial said that European equity markets were more liquid and efficient than the complex patchwork of exchanges and post-trade systems along national lines would suggest.

The report’s authors repeat a point made by many market participants – that copying the structure of the US market could harm liquidity, the improvement of which has always been a stated goal of those pushing for change.

There are some fair concerns about the direction of travel in Europe, mainly that European public equity markets have become less ‘public’, with a larger share of trading taking place away from traditional exchanges and trading venues or in the form of equity swaps.
The share of trading on primary exchanges has fallen to less than a third of all trading volumes, while the use of alternative mechanisms such as systematic internalisers has grown. However, the overall balance between ‘on’ and ‘off’ venue trading has stayed the same since the late 2010s, and the market remains attractive to issuers and investors.

Morningstar multi-asset research notes that the euro area economy is bouncing back after energy price shocks and highly restrictive monetary policy held back its economic performance in 2023–24.

The IMF expects GDP growth in the EU states that use the euro to average 1.2% over 2025–29, showing a return to growth that better reflects their potential under more neutral monetary conditions.

The Morningstar research states that Europe ex-UK has outperformed every other key market except the US over the last 10 years and that its cumulative performance has topped emerging markets, the UK and Asia Pacific developed markets.

The launch of a consolidated tape in the EU and in the UK (expected in 2026 and 2027 respectively) will provide a clearer and more complete view of liquidity across different mechanisms.

According to the New Financial report, the main priority in market structure should be introducing more competition in post-trade, such as requiring more interoperability in clearing and more open access to and competition between CSDs.

Source: Finance Magnates