Best Thread Capital Spreads

[tar]

July 2009

London Capital Group Holdings plc

Trading update

London Capital Group Holdings plc ("the Group" or "LCG"), the financial services
and online spread betting company, gives the following trading update in respect
of the first half of the current financial year ended 30 June 2009. LCG will
announce its interim results on 18 August 2009.

As previously reported and outlined, we have experienced adverse trading
conditions in the first half of 2009. While revenue from trading has increased,
profits have been impacted by lower levels of interest income, and greater
investment in new trading software and white labels. As a result of these
factors we anticipate that profit before tax and share based payments will be
approximately £3.75m, compared with £5.9m for the same period last year.

Our KPI's continue to be robust and we are experiencing strong organic growth in
new client acquisitions, average daily trade volumes and client funds on
deposit.

We have also recently acquired the assets of Chaucer Digital including
Intellectual Property and key staff members. Chaucer Digital has been central to
the development of our new proprietary trading platform software.

Cash generation has continued to be strong and the company has no bad debts
during H1'09.

Although LCG's revenues have traditionally been stronger in the second half,
predictability of earnings has become more difficult in the current range-bound
market conditions. All the Company's divisions remain profitable and we are
pleased to report that we have recently seen signs of improved performance.

Finally, it is the Board's current intention to pay an interim dividend of 2.5
pence per share which is the same as the dividend paid for the equivalent period
last year. This reflects the strong underlying earnings and cash flows of the
Group.

 

[gle101]

July 2009

London Capital Group Holdings plc

Trading update

London Capital Group Holdings plc ("the Group" or "LCG"), the financial services
and online spread betting company, gives the following trading update in respect
of the first half of the current financial year ended 30 June 2009. LCG will
announce its interim results on 18 August 2009.

As previously reported and outlined, we have experienced adverse trading
conditions in the first half of 2009. While revenue from trading has increased,
profits have been impacted by lower levels of interest income, and greater
investment in new trading software and white labels. As a result of these
factors we anticipate that profit before tax and share based payments will be
approximately £3.75m, compared with £5.9m for the same period last year.

Our KPI's continue to be robust and we are experiencing strong organic growth in
new client acquisitions, average daily trade volumes and client funds on
deposit.

We have also recently acquired the assets of Chaucer Digital including
Intellectual Property and key staff members. Chaucer Digital has been central to
the development of our new proprietary trading platform software.

Cash generation has continued to be strong and the company has no bad debts
during H1'09.

Although LCG's revenues have traditionally been stronger in the second half,
predictability of earnings has become more difficult in the current range-bound
market conditions. All the Company's divisions remain profitable and we are
pleased to report that we have recently seen signs of improved performance.

Finally, it is the Board's current intention to pay an interim dividend of 2.5
pence per share which is the same as the dividend paid for the equivalent period
last year. This reflects the strong underlying earnings and cash flows of the
Group.

Not a bad report at all, considering there is a grim recession going on. Apparently they have invested a lot of money in the new platform. They get thumbs up, at least from me.

 

[Claudia123]

Simon

Define scalping to me and why CS dont like it. Not my style of trading but why should it be a problem. is it you havent got time to hedge? another question if i hit you at 500 euro a tic would you take the bet would you hedge??

 

[Phil Mibbutz]

phil

i am sorry but we do not give "different prices to different clients"... all clients get the same price. While everyone here talks about Mifid (best execution) as though they have a clue what it all means ...please actually read the bloody thing!

Actually, I didn't say that, but as someone else has pointed out, by putting some 'troublemakers' on manual CS does give different prices to different clients.

I did like the comment about "maybe you would get as good a deal in the US via DMA" i have to assume this particular commentator had never actually tried to trade over there.

No, I'm in the UK, but are you saying that US traders can't get RT commissions of a couple of dollars, and relatively low opening deposits/margins on futures?

re the US question over cfds or spread bets being permitted over there ...the answer will probably be that if they do not allow cfds then the US exchanges will continue to drain liquidity and volume as US equity trading moves to more favorable centres (Goldman quote US equity cfd's to LCG out of London but cannot do the same for their US clients in the States !). The US prides itself on its capitalistic outlook. If revenue is draining then they will change.

Spread betting ? unlikely ...but Spread Trading ? possibly

Nadex?

simon

PS. Shame about LCG's 30% drop in profits.

 

[gle101]

Simon
n
Define scalping to me and why CS dont like it. Not my style of trading but why should it be a problem. is it you havent got time to hedge? another question if i hit you at 500 euro a tic would you take the bet would you hedge??

You will get the same old story, not enough time to hedge, network latency and traders taking advantage of the same. They don't need to hedge every bet, just what is not balanced out by the book. Above that, they have a risk management system that takes over when they need and must hedge. The way Simon keeps ranting about it, my guess is, that the risk management system is stretched to the maximum, this in order to save commission cost.

 

[tar]

Not a bad report at all, considering there is a grim recession going on. Apparently they have invested a lot of money in the new platform. They get thumbs up, at least from me.

Other SB firms made record volumes and profits in this high volatility enviroment ! . Maybe it is the new platform , but i cant imagin that they invested that amount of money on such a platform , it is only few upgrades , i think CS having a serious issue here , a lot of traders stopped using them in this thread alone ...

 

[gle101]

Other SB firms made record volumes and profits in this high volatility enviroment ! . Maybe it is the new platform , but i cant imagin that they invested that amount of money on such a platform , it is only few upgrades , i think CS having a serious issue here , a lot of traders stopped using them in this thread alone ...

It is an entirely new trading platform system. This involves a major investment, no doubt about it.

 

[gle101]

Simon, is your firm acting in a client's best interests, as well as to obtain the best possible result in the execution of an order for a client?
Says it all, doesn't it?

Key aspects of MiFID

Authorisation, regulation and passporting : firms covered by MiFID will be authorised and regulated in their "home state" (broadly, the country in which they have their registered office). Once a firm has been authorised, it will be able to use the MiFID passport to provide services to customers in other EU member states. These services will be regulated by the member state in their "home state" (whereas currently under ISD, a service is regulated by the member state in which the service takes place).

Client categorisation : MiFID requires firms to categorise clients as "eligible counterparties", professional clients or retail clients (these have increasing levels of protection). Clear procedures must be in place to categorise clients and assess their suitability for each type of investment product. That said, the appropriateness of any investment advice or suggested financial transaction must still be verified before being given.

Client order handling : MiFID has requirements relating to the information that needs to be captured when accepting client orders, ensuring that a firm is acting in a client's best interests and as to how orders from different clients may be aggregated.

Pre-trade transparency : MiFID will require that operators of continuous order-matching systems must make aggregated order information on "liquid shares" available at the five best price levels on the buy and sell side; for quote-driven markets, the best bids and offers of market makers must be made available. (Note consideration is being given to extending these requirements to other financial instruments. Under Article 65(1) of Directive 2004/39/EC, the European Commission is due to submit a report to the European Parliament and to the Council on extending pre- and post-trade transparency requirements to transactions in financial instruments other than shares by October 2007.)

Post-trade transparency : MiFID will require firms to publish the price, volume and time of all trades in listed shares, even if executed outside of a regulated market, unless certain requirements are met to allow for deferred publication. (Note see comment above regarding extension of these requirements to other financial instruments).

Best execution : MiFID will require that firms take all reasonable steps to obtain the best possible result in the execution of an order for a client. The best possible result is not limited to execution price but also includes cost, speed, likelihood of execution and likelihood of settlement and any other factors deemed relevant.

Systematic Internaliser : a Systematic Internaliser is a firm that executes orders from its clients against its own book or against orders from other clients. MiFID will treat Systematic Internalisers as mini-exchanges, hence, for example, they will be subject to pre-trade and post-trade transparency requirements (see above).

Source: Wikipedia

 

[Phil Mibbutz]

Can't see how any SB provider ever satisfies the 'best execution' criteria.

 

[ns1000]

Can't see how any SB provider ever satisfies the 'best execution' criteria.

By fulfilling their own order execution policies.

 

[gle101]

I have been looking at some pages of Paul Nelson's book "Capital Markets Law and Compliance: The Implications of MiFID".

I have been trying to find information that supports Simon's viewpoint on the matter. Under the chapter 'Dealing and executing orders' I found the following paragraph. It states that they can refuse to execute an order. But this holds only as long as it does it 'in a non-discriminatory way'. It very clearly points out the the SB are not allowed to flag and discriminate clients in the way some SB are practicing on a frequent basis.

Care to comment, Simon?

13.3.3.7 Deals undertaken

The firm can limit the number of transactions it undertakes both with an
individual client (as long as it does it 'in a non-discriminatory way' based on
matter such as credit rating and available inventory) and clients generally
(again in a non-discriminatory way' set out in a published policy), if the
firm cannot execute ... [the number of] orders received without exposing
itself to undue risk ... [based on] the volume of ...transactions, the
capital ... available to cover the risk ... and the prevailing conditions in
the market' (MAR 6.14).

 

[PipStar]

Simon, is your firm acting in a client's best interests, as well as to obtain the best possible result in the execution of an order for a client?
Says it all, doesn't it?

Key aspects of MiFID

Best execution : MiFID will require that firms take all reasonable steps to obtain the best possible result in the execution of an order for a client. The best possible result is not limited to execution price but also includes cost, speed, likelihood of execution and likelihood of settlement and any other factors deemed relevant.

This is the rule that spreadbet firms ignore day in and day out and are getting away with it so far.

 

[capitalspreads]

best execution

one wonders how all this would equate to FX platforms... where it is quite normal for the bank feeds to be widened for different clients.

gle101

it depends how you read it .. you have focussed on the words "non-discriminatory" . I (of course) would focus on the rest of the sentence "if the firm cannot execute ... [the number of] orders received without exposing itself to undue risk ... [based on] the volume of ...transactions, the capital ... available to cover the risk ... and the prevailing conditions in the market' (MAR 6.14).

there is much more to Mifid than just this one clause. The fact is that our 'order execution policy' (which all clients agree to when opening an account) entitles LCG to reject client trades. You must remember that you are not trading on an exchange, you are trading with a market maker (us).

as i have said time and time again the vast majority of clients (over 98pc) are on auto.

on another note
i have given a definition of scalping (as seen from the CS point of view) many many times in this thread

simon

 

[ZEPPO]

best execution

one wonders how all this would equate to FX platforms... where it is quite normal for the bank feeds to be widened for different clients.

gle101

it depends how you read it .. you have focussed on the words "non-discriminatory" . I (of course) would focus on the rest of the sentence "if the firm cannot execute ... [the number of] orders received without exposing itself to undue risk ... [based on] the volume of ...transactions, the capital ... available to cover the risk ... and the prevailing conditions in the market' (MAR 6.14).

there is much more to Mifid than just this one clause. The fact is that our 'order execution policy' (which all clients agree to when opening an account) entitles LCG to reject client trades. You must remember that you are not trading on an exchange, you are trading with a market maker (us).

as i have said time and time again the vast majority of clients (over 98pc) are on auto.

on another note
i have given a definition of scalping (as seen from the CS point of view) many many times in this thread

simon

Sorry but no, Simon; I am no client of yours - I trade with IG, but the one thing that spreadbetting firms are not is "market makers"; you are, like all other spread betting firms, a glorified bookmaker.
Market makers are obliged to take trades, wether they like or not - they have, by law, to make a market!
They cannot choose not to take a trade, you do.
Hope my point is clear.

Eduardo.

 

[gle101]

gle101

it depends how you read it .. you have focussed on the words "non-discriminatory" . I (of course) would focus on the rest of the sentence "if the firm cannot execute ... [the number of] orders received without exposing itself to undue risk ... [based on] the volume of ...transactions, the capital ... available to cover the risk ... and the prevailing conditions in the market' (MAR 6.14).

there is much more to Mifid than just this one clause. The fact is that our 'order execution policy' (which all clients agree to when opening an account) entitles LCG to reject client trades. You must remember that you are not trading on an exchange, you are trading with a market maker (us).

simon

Simon, thanks for your reply. I see now that you are finally open to negotiation on the issue of MiFID "Best execution" directive, very good!

Yes, you have every right to refer to the last part of the paragraph (in fact, I knew you would). However, you cannot implement this part, that you are referring to, based on grounds of discrimination, such, for example an undesired trading style. CS use discrimination to justify flagging and blocking out clients, this solely in order to limit their trading success.

It is very clear, discrimination of individual clients is not approved practice according to the rules of the MiFID financial directive. You cannot "override" the MiFID "Best execution" directive, this by setting you own standards in your 'order execution policy'. I would even go to the length to say, even if clients have signed up for it, you are not allowed to implement it, because it so vigorously violate the MiFID "Best execution" directives.

Please correct me if I am wrong on this last part, in fact I am only applying common sense. I am quite sure I can find a paragraph on this, if i dig deeper into the MiFID.

 

[Phil Mibbutz]

Seems to me that the 'order execution policy' should be amended to make it clear, because I'm sure SB providers wouldn't want to mislead clients deliberately.

Incidentally, only 98% of clients on auto? I find it hard to believe that there are people who still try to trade once they're being nobbled.

 

[PipStar]

Incidentally, only 98% of clients on auto? I find it hard to believe that there are people who still try to trade once they're being nobbled.

Possibly the 2% (personally I reckon more) of his clients who are NOT on auto execution are the successful ones. Most of them have probably left but the account remains on dealer confirm.

Those 98% on auto execution (personally I reckon much less) could well be the newbies or those who win occasionally but that he knows by their trading style will give it all back sooner rather than later. I mean, common, you need to give good execution to losers. Otherwise, how would SB companies make a profit?:whistling

 

[Phil Mibbutz]

Consistent losers will no doubt always get instant fills and brilliant service.

 

[foredog]

Market makers are obliged to take trades, wether they like or not - they have, by law, to make a market!

with regards to UK stocks...only in their size, which is generally small at their price, not the touch price. so it may be 125 -26 on the yellow strip but one mm is 125-30 and the other 121 -6 both only in 5000 so if you want to trade in 10000 neither has any obligation to deal in anything over 5000.

In Sets stocks there are no MM so no -one is obliged to deal in anything with you...

pro's and con's of everything.

 

[gle101]

Possibly the 2% (personally I reckon more) of his clients who are NOT on auto execution are the successful ones. Most of them have probably left but the account remains on dealer confirm.

Those 98% on auto execution (personally I reckon much less) could well be the newbies or those who win occasionally but that he knows by their trading style will give it all back sooner rather than later. I mean, common, you need to give good execution to losers. Otherwise, how would SB companies make a profit?:whistling

Yes I agree, the figure 2% on dealer intervention is probably much higher. With a client base of 45000 there is a vast numbers of clients being discriminated daily, and this violate the rules of the MiFID financial directives.