Banned for winning too much?

[arabianights]

Do the maths and you will see this is just utter nonsense.

Assume 2 traders on the S&P500.

One goes long £10/point @780.00 and exits@790

A 10 point move.

Trader makes £100 -(spread 0.7x10) = £93-
Spread bet company takes £7 from the total.

------------------------------------------------------------------------------
Trader 2, a scalper goes long £10/point @780 and exits@782

Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £13, S/B company =£7-

Goes long again £10/point @782 and exits@784
Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £26, S/B company =£14-

Goes long again £10/point @786 and exits@788
Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £39, S/B company= £21-

Goes long again £10/point @788 and exits@790
Takes 2 points = £20 - £7(spread) = £13
Spread bet company takes £7 from the total.

Running total: Trader = £52, S/B company= £28

------------------------------------------------------------

Ok, hypothetical examples can be tailored and you could argue that a scalper might make more trades in the same 10 point move, but be honest, which of the above would YOU prefer as a client if you were a S/B company?

You are assuming that the spread betting company is hedging every trade, but with the exception of futures betting they are not, instead they are operating as Steven describes.

You are absolutely right that the average broker loves a frequent trader. Similarly prop houses...

 

[arabianights]

Maybe because they buy at the offer and sell at the bid?

Irrelevant if they're consistently losing money for the spread betting company.

 

[Joey25]

Idiot.

 

[tar]

No one will allow you to 'scalp' in the way the banned traders try to 'scalp' spread betting companies for exactly the same reasons. And a DMA broker will not guarantee you a fill unless you are willing to go to market.

Or look at it this way, what possible advantage do the spread betting companies derive from these small traders? Two things: either they help balance the spread betting company's book or they are appalling and give the SB company money. An accomplished scalper making a grand a week and twenty trades a day is neither helping balance the book nor giving the spread betting company money. Why on earth would they want to keep them?

they will keep them for marketing purposes ( Good reputition ) ... a firm like IG make 65 m pounds will not care about small traders , dont forget most of SB clients loose , so why not to keep scussesfull scalpers ... ?

 

[arabianights]

Business 101:

A customer is costing you money and not providing you with any services in return. Do you want to keep the customer or not?

 

[Joey25]

I said that because you've assumed that they are costing you money.

I am saying that they do not over a reasonable period of time cost you money because they buy at the offer and sell at the bid.

It's a truism to say someone who is costing you money is a problem. However, much more difficult to actually find these individuals who somehow magically overcome the firm's hedging practices (over a reasonable period of time).

 

[tar]

Business 101:

A customer is costing you money and not providing you with any services in return. Do you want to keep the customer or not?

They give the firm book a balance so i will keep , they give me good reputition so i will keep , and btw the market will take care of these small profitable traders someday :cheesy:

 

[donaldduke]

they will keep them for marketing purposes ( Good reputition ) ... a firm like IG make 65 m pounds will not care about small traders , dont forget most of SB clients loose , so why not to keep scussesfull scalpers ... ?

One trader 'scalping' 50K a year might not be a problem.

But the problem is if 1 guy can make 50K then a 100 guys can potentially make 50K each using the same technique. That becomes 5 million a year out the profits for the firm.

So the SB companies are eager to shut down all 'loop holes' and will use any available (dirty) tricks as required.

Im not moaning about this. This is just a fact of SB life, and a cost of doing business with any of these firms.

 

[Joey25]

One trader 'scalping' 50K a year might not be a problem.

But the problem is if 1 guy can make 50K then a 100 guys can potentially make 50K each using the same technique. That becomes 5 million a year out the profits for the firm.

So the SB companies are eager to shut down all 'loop holes' and will use any available (dirty) tricks as required.

Im not moaning about this. This is just a fact of SB life, and a cost of doing business with any of these firms.

Why, over say a period of a year, wouldn't the firm earn the bid-offer spread, the scalper earn his £50K, and Gordon Brown get his tax?

How does the scalper fail to narrow the firm's overall exposure to the Dax when going short if the aggregate is currently long? (hence negating the need to hedge).

And if the scalper adds to the firm's existing exposure, how does he consistently circumvent the hedging "triggers" such as hedge when book exposure is net +10 lots, +20 lots etc..?

 

[stevespray]

Why, over say a period of a year, wouldn't the firm earn the bid-offer spread, the scalper earn his £50K, and Gordon Brown get his tax?

How does the scalper fail to narrow the firm's overall exposure to the Dax when going short if the aggregate is currently long? (hence negating the need to hedge).

And if the scalper adds to the firm's existing exposure, how does he consistently circumvent the hedging "triggers" such as hedge when book exposure is net +10 lots, +20 lots etc..?

You've become caught up on the idea that the firm buy at 'bid' and sell at 'ask' which is by no means a given and you don't appear to know what you're talking about (no offence meant) :cheesy:

You also assume that the firm off set each and every deal which a client does on a second by second basis which, as I explained in a prior post, they do not.

Basically if the average time which you remain in a trade dips below a certain level (and you manage to make money) then you will become non economically viable for that firm.

Steve.

 

[Joey25]

You've become caught up on the idea that the firm buy at 'bid' and sell at 'ask' which is by no means a given and you don't appear to know what you're talking about (no offence meant) :cheesy:

You also assume that the firm off set each and every deal which a client does on a second by second basis which, as I explained in a prior post, they do not.
Basically if the average time which you remain in a trade dips below a certain level (and you manage to make money) then you will become non economically viable for that firm.

Steve.

No, I don't.

Plus have actually worked as a risk manager on the sell side (no offence meant)

Have the decency to read what I actually wrote before being a t***

 

[stevespray]

No, I don't.

Plus have actually worked as a risk manager on the sell side (no offence meant)

Have the decency to read what I actually wrote before being a t***

Okay then - from your original posting...

If they can effectively work the bid-ask spread in the manner which you outline then why bother with clients in the first place? They could just sit there all day selling at ask and buying at bid making the spread each time could they?

Steve.

 

[Joey25]

Okay then - from your original posting...

If they can effectively work the bid-ask spread in the manner which you outline then why bother with clients in the first place? They could just sit there all day selling at ask and buying at bid making the spread each time could they?

Steve.

They are acting as market makers, not bid-offer scalpers (wtf?).

Also they don't have a 15-minute egg timer which they they use to decide when they hedge (you come across as an IT guy by the way)

Joey

 

[stevespray]

They are acting as market makers, not bid-offer scalpers (wtf?).

Also they don't have a 15-minute egg timer which they they use to decide when they hedge (you come across as an IT guy by the way)

Joey

But the bid-ask spread is of no value if the client is making money in the short time frames ie just a few minutes. The firm has no chance to lay the position off and lock in a profit since the cost of dealing to the underlying would just about leave you with a locked in break-even trade - therefore you must 'bucket' the trade and run it against your client.

Steve.

PS They may not have an egg timer but they will have a method of periodically checking the balance of their book. Each firm will have a defined maximum exposure limit for its market (its the law in terms of FSA regulated firms operating in the UK).

 

[Joey25]

Is he the only client doing this?

If not, do they all trade in the same direction?

Does Man Financial have a special ability to deal with scalpers that the bookie doesn't?

I can see why people believe that these bucket shops cheat people, and perhaps there is the odd one which cuts corners by directly trying to screw people, but this nonsense about individuals "losing them money" doesn't add up if you probe hard enough.

P.S. "Periodically check the exposure of their book" : that's what the risk manager / trader is doing continuously - it's his job!

 

[stevespray]

Is he the only client doing this?

If not, do they all trade in the same direction?

Does Man Financial have a special ability to deal with scalpers that the bucket shop doesn't?

I can see why people believe that these bucket shops cheat people, and perhaps there is the odd one which cuts corners by directly trying to screw people, but this nonsense about individuals "losing" them money doesn't add up if you probe hard enough.

Really? Then why do firms who provide retail forex instruments have fairly strict 'non scalping policies'?

FWIW I used to trade FTSE Binary Bets on Finspreads just after they first launched. In the end they had to take 'steps' to slow / stop me trading them... why? because the human mind, at times, is just far more powerful than a complex computer model!

Steve.

 

[arabianights]

Is he the only client doing this?

If not, do they all trade in the same direction?

Presumably the succesful nuisance scalpers will at any one time be positioned in the same direction, yes.

Does Man Financial have a special ability to deal with scalpers that the bookie doesn't?

Sure, it can not fill the client.

 

[stevespray]

Presumably the succesful nuisance scalpers will at any one time be positioned in the same direction, yes.


Sure, it can not fill the client.

Correct!

It all comes down to 'value' in terms of 'financial value' Certain firms dealing practices actually offer the firm greater value than the spread actually implies. This is because the firms choice to decide if it wants to accept or reject a clients order is done in hindsight. While the client had to trade vs 'the live price' the dealer has the ability to examine what the market has done since the client clicked 'buy' or 'sell'. This means that each time you try to trade your are writing your broker a free options trade. This option has financial value although some people will not see / cannot see it.

Steve.

 

[Joey25]

Correct!

It all comes down to 'value' in terms of 'financial value' Certain firms dealing practices actually offer the firm greater value than the spread actually implies. This is because the firms choice to decide if it wants to accept or reject a clients order is done in hindsight. While the client had to trade vs 'the live price' the dealer has the ability to examine what the market has done since the client clicked 'buy' or 'sell'. This means that each time you try to trade your are writing your broker a free options trade. This option has financial value although some people will not see / cannot see it.

Steve.

That's right -I stand corrected and will bow out.

"£1 bet on FTSE coming in guys: accept or reject?"

"50p on Nasdaq daily, Fred. Don't accept that one."

"Bill, help! 40 simultaneous orders. Heck, what should I do?"

"Tell them they'll have to get in line like everyone else"

 

[tar]

That's right -I stand corrected and will bow out.

"£1 bet on FTSE coming in guys: accept or reject?"

"50p on Nasdaq daily, Fred. Don't accept that one."

"Bill, help! 40 simultaneous orders. Heck, what should I do?"

"Tell them they'll have to get in line like everyone else"

lol