Simon…. A couple of points if I may….
In one of your previous posts you briefly mentioned the subject of clients being able to cancel orders or, as it stands, not being able to cancel orders. You recounted that your staff had detected clients cancelling or amending orders after they had been triggered – You say that Capital have put a stop to the practice which, on the face of it, appears fair. My question is…. Are you allowed to do that?
Please humour me whilst I raise few potential points!
Over the years I have had reason to read a good number of spread betting terms and conditions from one firm or another. In simple terms the ‘placing of a bet’ (opening or closing) always follows the same legal pathway. In contractual terms the spread betting firms never make offers to clients in respect of the prices quoted. By this I mean that the quoting of a price, either verbally on the telephone or via the internet website, never constitutes an offer by the company to trade at the quoted prices. The quoting of a price is purely the company’s way of conveying a price to the client which the company is ‘likely’ to contract at. I hope I’m correct so far! In effect therefore, since a contract can only be formed when there is an ‘offer’ followed by an ‘acceptance’, the ‘offer’ to trade is being made by the client (based on an indicated price) and the acceptance or non acceptance is made by the firm (dealing staff, computer or otherwise). A firm would never make ‘the offer’ since, if it worked that way, the firm would never be able to refuse a trade as a contract would be formed the moment that the client ‘accepted’ the firm’s ‘offer’.
This raises some interesting contractual points. Firstly, and most importantly, if a client submits an order (technically their ‘offer’) and it is sent for manual processing then a time delay occurs before the client finds out the result of their order (offer). From a legal perspective, if, during the delay, the client changes his / her mind he / she are well within his / her rights to withdraw the offer. This would apply to all orders which were waiting be it stop orders, limit orders or market orders. Limit and Stop orders are the same as market orders in respect of them being ‘offers’ made by clients to trade one way or the other at a particular price. In one of your previous posts you mentioned specifically that you had stopped clients being able to alter or cancel orders in the time period between the order being triggered and the order being filled – I would respectfully suggest that you can not do this. I understand the abuse which can occur through the manipulation of stop and limit orders in such a situation but this doesn’t alter the basic principles of contract law. In simple terms, if someone makes an offer then they can withdraw that offer at anytime up to the point at which acceptance is made – there is nothing that you or any other spread betting firm can do to change that. By stopping someone withdrawing an offer to trade you are implying that they are contracted at that price when in fact they are not. You can not create a situation where client is obligated to keep their offer ‘on the table’ whilst reserving the right yourself not to contract. By preventing a client from withdrawing their offer to trade are you not creating a situation of implied contract? (ie the client could claim that, because he / she couldn’t withdraw the offer to trade he / she considered that the trade was already binding).
Food for thought I’m sure you’d agree!!
Steve.
