97% Spread Betters lose their money!

[donaldduke]

97% seems to be in the right ball park to me.

I think that at any given time more than 3% of accounts are profitable. This is because losing accounts get closed down after a few months while the winning accounts remain open.

So if you take a snapshot it looks like there are more winners as
a percentage than there really are.

And the hedging risk thing work both ways, im sure some of
those guys who made millions betting on the dollar a few months
back were probably hedging their portfolios. The spread bet
company are always happy to advertise these 'got rich quick
winners'. But dont like to mention the masses who lose it all
even quicker.

 

[zigglewigler]

The key bit here is “your offer to open or close the Bet must be given whilst the quote is still valid”, and the key word in that passage is “GIVEN”. When I ‘gave’ my order the quote was valid – IG doesn’t dispute this fact. For your argument to be correct the word would have to be “received” and even then it would be possible to argue that as soon as I get an order reference back (about 1 second after I submit the order) that IG have ‘received’ my order.

It is clear to see that in order to refuse a bet they must first ‘reserve the right not to accept the bet at the level quoted’ – They can only do this by finding that the bet didn’t satisfy all the terms of 5(5) “AT THE TIME THE OFFER WAS SUBMITTED” – That is the key bit.

You say in reference to 5.5 'at the time the offer was submitted', could you point me to this quote from T&C?

Steve, it is a question of semantics, your understanding is different to IG' usage, 'given' you take to mean initiated, as I pointed out earlier, IG see 'given' as part of a process up to the point a dealer views your offer. The word 'given' has two parts, if I give you a gift, you must also receive it, otherwise I haven't yet given it. IG have a separate clause for Internet trading, 5.5(d), they don't bother with validity of phone quotes, because you have a dealer in your ear, you want it, you take it, and most importantly he can action it immediately. 5.5(d) has a subtext, that I admit is obtuse, that the validity of electronically transmitted trades is relevant to the whole 'given' process. If they said 'initiate' you would have a clear cut case, what they really should say as you point out, is 'received', but this is the grey area that allows lawyers to make a living. It clearly is not an issue on the phone that a quote can ever be invalid, but via the client pages, they are in very cryptic fashion, stating the limitations of that system. Being under staffed to cope with the popular indexes will always create problems

IG make it clear in 5.3 that 'execution' and 'conformation' are critical, it makes no difference that you received an order number straight back, the dealer has not yet touched it.

IG refer to 'genuine one click dealing' inside an April 03 update and simply 'one click dealing' on the back cover. Genuine or otherwise, you place too much importance on that word, 5.3 still requires confirmation.

I agree that IG is some what liberal with the truth, genuine one click dealing gives the wrong impression, and I am sure you are aware of SB firms trading business model, you must agree that they wouldn't stay in business being so exposed to moving markets. There are numerous scenarios where a rush to get orders in against a run away market, would mean they were unprotected, if they couldn't offer a quote relevant to the time of execution. This is the appeal of Cantor Index. .

I think IG should reimburse you, for simply painting a pretty picture of their platform, they clearly haven't laid out their T&C in a way that states their position clearly, they may be scrambling to find other ways to cover the ambiguity.

Interestingly in IG's T&C 23.5, a tax reference may shock a few. It states 'You acknowledge thst Bets may be subject to tax if, for example, they are made in the course of a business.' What do they know that we don't. Most people earlier in this thread thought otherwise??!! Any thoughts?

 

[chump]

"Steve, it is a question of semantics, your understanding is different to IG' usage, 'given' you take to mean initiated"

where a contract is reduced to writing,and the TC are in effect the written contract ,then the test of 'normal' understanding is the objective man test..what would a layman riding on the top deck of a bus in clapham take to be the meaning ...just trying to help..you can see that in this case insider understanding of these terms would probably be irrelevant from a legal point of view.

 

[stevespray]

Morning Zig,

“You say in reference to 5.5 'at the time the offer was submitted', could you point me to this quote from T&C?”

Yes, I can point it out. All the conditions in section 5(5) are invoked from 5(4) where the relevant part of 5(4) says “If any of the conditions set out in Term 5(5) are not satisfied AT THE TIME you offer to enter into or close a Bet we reserve the right not to accept your offer at the level quoted.” – okay, I may have inadvertently typed a slight variation in the wording in my quote where I used the word ‘submitted’ but the actual wording doesn’t alter my argument.

It is also worth bearing in mind at this point that you will notice that IG aren’t bound to deal with orders in any particular timeframe. That is to say that I could have an order on the screen for 5 minutes awaiting conformation and there is nothing I could do about it, however they would be bound, by the T&C, to deal with my order, at whatever point it time, based on the criteria at the time my offer was submitted and not at the time my order was reviewed.
Personally I think that you argument about the word ‘given’ is a weak one. IG have told me that when I have ‘given’ my order a reference number is returned to me to show that they have ‘received’ my order so the two parts of analogy relating to the gift have been satisfied. I could add further to the analogy by suggesting that when you came to my house to give me my gift I wasn’t in so you left it with my son. My son then forgot to give me the gift and instead left it under a pile of clothes in his bedroom. If the following day you meet another friend whilst shopping you could reasonably state to that friend that “I have given Steve a gift”, the fact that I haven’t actually got that gift in my possession yet doesn’t effect the outcome of your claim that you have given that gift.

As ‘chump’ has pointed out, its down to normal understanding of the wording used. At the time I make the offer, in my opinion, is a fixed point in time at which my order is submitted and received by IG’s system – that is the exact point which ‘the offer is given’ – this protects both parties, IG against internet delays and the customer against delays once my order is known by IG. This is the only way that IG can make the promise of “the price you see is the price you get”. As I have already pointed out, IG have sent me a letter in which they state that none of the conditions that are listed in 5(5) are relevant to my particular refused order, there are apparently (according to the head of the legal department) other conditions which aren’t listed which allow them to refuse certain orders. As of yet he has failed to provide me with these extra terms and conditions which make up the contract which exists between myself and IG Index.

You comments regarding trading business models may of course be correct but it isn’t the customers which are making advertising claims about the services that IG are prepared to offer, it is IG themselves. Like you say, there can be times where a runaway market could leave them exposed but you have to remember that they do swing their market from the underlying and their spread is far bigger than that of the underlying so it isn’t a one way street. It’s also worth remembering that in the ‘runaway’ situation volume on the underlying market is normally huge so likewise IG would also expect bigger volumes to pass through and therefore this would have to be considered by IG when they designed their systems. The things that you have outlined are all clearly a ‘risk element’ when operating a parallel market but as you point out these ‘numerous scenarios’ could reasonably considered ‘the nature of the business’. Remember, they offer to enter into the customer agreement with us, we don’t demand it from them.

I totally disagree with you on what you say about “genuine one click dealing”, it’s not a case of being “liberal with the truth” – it’s an advertised claim about their platform / service to make it seem better than that of a rival. As someone who runs a business I can tell you that when you advertise something you advertise the strong points of your service in order to promote yourselves above a competitor, it’s purely a ploy to make a potential customer choose you.

Chump,

I think you are correct. Consumer law in this country is such that large companies stand little chance in ‘David and Goliath’ confrontations such as the one that is going to occur if IG don’t sort this matter out correctly. As I have already pointed out, I feel that IG Index’s advertising claims alone would be enough, from a consumer’s point of view, to support my case on the grounds that they are claiming to offer a service which they aren’t really prepared to provide. Secondly, the T&C as they are written show that the agreed procedure wasn’t followed. Thirdly, even if IG could show that they had acted according to the T&C (which they clearly can’t) they would be clearly revoking their advertising claims. And fourthly, if they had acted inside the T&C and had no obligation to provide the service which they advertise I could show that their operating procedures, which IG claim they are allowed under the T&C, were grossly unfair to the detriment of the customer, ie they can queue a customer for an unspecified period of time and then judge a customers order after that period regardless of what time the order was entered – this can obviously lead to ‘cherry picking’ as I have already shown where dealers allow bets going into loss to be opened whilst rejecting orders which favor the customer.

Steve.

 

[chump]

If your facts are as stated I doubt they would defend any action to reclaim your 'losses'. They would appear to have already 'shot themselves in the foot' by documenting inaccuracies in the way they have responded todate. I would have thought the biggest risk you have is that if you pursue this they may exercise their right to close your account. If that does not matter a small claims application would probably bring an offer to settle. Although I think you can't do this if you have a case already pending with the FSA.

 

[stevespray]

Chump,

The FSA / Ombudsman have informed me in writing that their investigating my complaint in no way revokes any rights I have in pursuing the matter through the courts.

If they close my account then fine, I only want to do business with them if they are happy to do business with me. It would perhaps show ‘sour grapes’ if they acted that way but I should point out that, so far, no such outcome has even been hinted at so I wouldn’t expect such a response.

However, if I was successful then I’d be interested to find out why the whole compliance / compliant procedure has failed so badly. A couple of the early responses to my complaint were very poor with the compliance officer failing to even mention any of the relevant sections which dealt with rejection criteria. Even when I confronted her on the telephone about it she just locked up and refused to even read the text of 5(4) to me and she certainly didn’t want to discuss it.

Steve.

 

[chump]

Yes,my mistake. I was referring to the OSS complaints procedure and not the FSA. The latter applies here.

I can 'see' how caught up in this you are. A cautionary note for you learned the hard way. It is very easy in situations such as this to get very emotive about issues to the point where you make them a matter of principle as opposed to pragmatic goals that relate to what you want to achieve.

At the risk of boos from the sidelines I would not pursue something like this now as a matter of principle. Too easy to get 'blinded' to what is actually achievable. My view is ,basically,if you cost me money,give it back with the interest and we'll call it quits.Cuts out all the surplus excess aggravation.

Ignore the above by all means.It's your issue to deal with.

Cheers

 

[zigglewigler]

Yes, I can point it out. All the conditions in section 5(5) are invoked from 5(4) where the relevant part of 5(4) says “If any of the conditions set out in Term 5(5) are not satisfied AT THE TIME you offer to enter into or close a Bet we reserve the right not to accept your offer at the level quoted.” – okay, I may have inadvertently typed a slight variation in the wording in my quote where I used the word ‘submitted’ but the actual wording doesn’t alter my argument.

Steve, you didn't point it out, because it isn't written, you typed it, in quotation marks no less! Are you seeing what you want to see? You must be going goggle eyed.

Playing devil's advocate is no fun, especially as I don't use IG. Most of your case is tight. I've tried to find an interpretation that supports the only way IG could do business and stay in business! Since they do not hedge positions on the market, they would be fools to late accept orders during a run away market, that is not covered by sufficient dealers. It is the same as brokers taking orders for say, e-mini contracts, not all can be filled at the requested level.

However, I found something interesting, in an IG dealing handbook from 2002. Maybe you've seen it and only mentioned it on a previous thread. But I would have thought it would be enough to prove your case, without referring to the T&C. It states under 'Seven Key Advantages' ,'Immediate dealing', 'We quote you a price and you can deal immediately; no tiresome waiting for an execution'. Well 'no tiresome waiting for execution' is the substantive and critical part to your argument, that I haven't heard yet! I haven't seen this wording in more recent publicity, but I don't think there is a 'statute of limitation' on that. If 'no tiresome waiting for execution' is still current, then case proved, if not 'one click dealing' still holds enough ambiguity, because of confirmation requirement in 5.3.

The inconsistency in their business model is that for phone quotes the client needs to make a decision quickly, to accept a quote, so that the dealer can action it, immediately. Whereas with an internet quote, that is then queued because of a genuine rush(you would be queued on the phone too) , though you've given your offer, they are not in a place to action it immediately. I still don't think 'one click dealing' is enough to say they must accept it, but if they claim that 'you can deal immediately, no tiresome waiting for an execution', then they do have to accept it.

 

[stevespray]

Zig – Yes, some good points. I do have some old dealing books etc but I’m pretty sure that they pre date the current platform. With the old platform you had to enter your order and then wait for a quote to come back to you at which point you could except or reject. It was like trading on the telephone but was done via the net. It could be that the handbook you are referring to is now out of date. One of the key advantages of the new platform was that the prices were stated to be live, steaming and tradable.

You talk about this ‘late acceptance of orders’ etc but as I have already said, it can cut both ways. Even though the customer is stated, in the T&C, as having the right to cancel their instruction any time up to having the trade executed there is no clear means by which to do this. There is no ‘withdraw offer’ or ‘cancel’ button on the trading platform. This could also be a key point. It could be claimed that IG Index deliberately makes it difficult for customers to withdraw submitted offers despite the fact that the customer is clearly allowed to do this. (At this point I could also mention that your argument about the order being ‘given’ is invalid on the grounds that the T&C say that I can “withdraw” my offer at anytime – In your argument you said that the offer being ‘given’ could refer to a whole process but I would suggest that the fact that they allow me to withdraw my offer implies that the offer would of first been ‘given’. If I haven’t ‘given’ my offer then I cant withdraw my offer and the only time that I can withdraw my offer is anytime up to the point the bet is executed). Anyhow, back to my main point. No ‘withdraw’ or ‘cancel’ button. If you think about what you have been saying about a runaway market then a few dangerous situations unveil themselves from the customer perspective. Firstly, I know plenty of people who will try to catch a reversal in a strong move, I include myself in that, it’s some kind of human nature. What if you were to enter a trade to short the dow when you saw it climbing sharply. Imagine that you entered the order and were then held for over a minute. In that time one of three things could happen. Firstly, but most unlikely considering the sharp move, the market could just got flat, secondly it could just carry straight on up and, thirdly, it could reverse sharply. In my experience the second and third scenarios are most likely especially if the move was set off by a news item. So lets say we entered are order to sell and are being held. If the market carries on going straight up then its fair to say that we are not going to want our order filled at the price quoted over one minute ago – we’d like to cancel our order but this is going to be difficult. I guess the only way to cancel would be to telephone but at this time we know that dealing is going to be very busy due to shear volume of orders passing through. The T&C state that IG must ‘acknowledge’ that the order has been cancelled before we can consider it cancelled so just ringing and stating that you want to withdraw an offer is not enough, we have to wait for them to state back to us that the order has been removed from their system. In reality we are faced with an order arriving at a dealers screen to sell the market some distance below where the market currently is. In my own personal experience IG don’t decline such deals, they except them putting you account in to arrears instantly.
On the other hand, lets imagine that the market does what you have predicted and reverses sharply. Your order is held just the same except on this occasion you account it clearly going to benefit if IG accept the deal. You’d be in an instant profit scenario. At this point the dealer would be in a situation similar to the one which you have suggested where he is faced with allowing a deal to be executed at a price that is better than any price available in the market. I would suggest at this point that there is a certain amount of pressure on this dealer to refuse the order and, in effect, use his ‘cancel’ button.
From the two analogies shown it is clear that IG Index have a massive advantage over the customer for several reasons. Firstly, they can hold orders for an unspecified time, secondly, once those orders are being held IG have a very easy way to reject the order (if the circumstances are beneficial) whilst the customer has a method of cancelling which is extremely difficult.
What this could lead to is an element of ‘cherry picking’ which would of course be to the detriment of the customer. I know this because both of the above have happened to me.

So being aware of these potential pitfalls is very useful when you come to read Terms and Conditions which govern business between Customers and Parallel Market Makers (PMM) such as Spreadbet Agents or CFD providers.
When reading through such T&C one can quickly see if the T&C are protecting just the PMM or are, in fact, protecting both parties. It is awareness of such finite details which ultimately govern weather a company can rip you off or not. This is where it starts to get important that the T&C’s are followed to the letter. There can’t be much room for ‘grey areas’ because, for the most part, such areas will be to the financial detriment of the customer and to the financial benefit of the PMM.
This is where the correct interpretation of IG Index’s T&C become very important, especially section 5(4) and 5(5). I would say that the ‘ethos’ of both the advertising and the T&C suggests that I can submit orders in realtime and that, providing I satisfy all the terms in 5(5) at that moment in time, I will get that order filled. I can not find any reason why ‘the man on the street’ could come to any other conclusion based on what is advertised and what is written in the T&C.

It is only when push has come to shove that IG Index’s true colours have come to light. As I have stated several times before, their head of legal claims that there are extra terms and conditions which make up the criteria listed in 5(5), he goes on to state that, these extra terms and conditions allow all dealers to have the final say on whether deals are excepted regardless of anything. Personally I can find nothing in the T&C as written which back up his claim. He has been unable to provide me with such extra terms and conditions. In my opinion the claims he makes about these extra terms and conditions which allow dealers to act in the way stated creates a huge imbalance in the rights of both parties to the determent of the customer.
I would suggest that this should be totally unacceptable to anyone who trades with IG Index and leads us full circle back to the title of the thread.
“97% of Spread betters lose their money” – It’s not surprising if the companies concerned can act in the way that they claim that they are entitled to act. The imbalance created by such actions would, I’d imagine, make it almost impossible to ‘strike it big’ by spreadbetting because once detected and placed in queues for manual dealing they are at liberty to ‘drive the nail in’ on unprofitable bets whilst minimising winning bets purely by acting in the ways that I have shown.

Good Morning,
Steve.

 

[dc2000]

Hi Steve I heard a few months ago from another dissatisfied IG customer like yourself and they had a video tape of a channel 4 documentary that featured IGs dealing room, seemingly whilst being inteviewed you can see in the background an alarm go off when a sizeable internet bet is being placed then the dealer takes a minute to decide the quote, This I must stress is only what I have been told and I have not seen the programme as for whether this was the new or old platform I dont know but it was made around the time of the start of the Iraq war.

 

[twiggytwo]

Hi Steve , I see that you say the head of the legal department of IG states that the reason for refusing your order at the price quoted was because there are other conditions that are not listed that allow them to refuse certain orders.
How can the contract be valid with IG if some of the conditions are not displayed and are withheld from the client / customer as you are signing for what you see.
What are the rules laid down by the FSA with regards to S/B hidden conditions? And what do the FSA think about IG's hidden conditions ? I think you may be on a winner, best of luck with your claim.
twiglet

 

[seguna]

SB Companies

I really wonder about SB companies and all their 'malpractices'. I have first hand knowledge of this through using Deal4free and no, this is NOT an excuse for any past losses etc. Truth is, I've made money in stocks as well as SB. I also follow futures and I have never experienced any of the price and quotes shenanigans I've experienced with Spreadbetting!

As if it is not enough that 'intermediaries' profit through spreads and commissions and the losses of the majority of underperforming traders, Spreadbetting brings its own unique risk in terms of prices and spreads. In normal open market with competition among market makers, this is great for traders. When you're locked into a trade dealing with only ONE market maker, you're at their mercy! Of course competition is improving services and we're seeing narrower spreads, lower margins and better platforms.

Does anyone have any ideas on what may be done to make SB pricing more 'open' or 'market consistent' while keeping it as financial bookmaking to keep the tax free advantages?
What about a Financial Spreadbetting exchange where bookies and other parties can offer competing bid/offers? What would this do to REAL markets?