jack
by 'real world' i mean buying or selling the 'real asset' rather than making a bet on it. . 'Real World' trading is using DMA or your broker
professionals (and by this i mean retail clients who are termed professional by deed of thier experience and trading styles, I do not mean Banks or Brokers) trading in the markets must pay a wide array of costs that are just not attached when considering spread bets. I am not talking about in/out merchants trading FX.
One of the very real advantages in spread betting is not the tax free status afforded to capital gains it is the fact that there is no "Stamp Duty, or commision" attached to your trades. Stamp duty is 0.5pc and commissions generally start at around £15 and go on up from there (on both sides of your trade). On CS the entire spread around the underlying market price in FTSE 100 stock is just 0.1pc (ie.0.05 pc above and below the bid/offer on the LSE)
On a trade in £50 (5000 shares) for a boring stock like Barclays at £3.50 would cost a buyer (if he paid only £15 comms) £102.50 in various fees/taxes. With CS he would pay just £8.75. To put this into perspective Barclays is traded on about a 0.5p bid/offer spread on the Exchange. Your various costs would add over 2p to the price. This far outweighs the benefit of being able to place your order within the spread on a DMA platform.
On the other point about the prices available on the FTSE future i would recommend that you actually spend some time and study how often the bid/offer is actually less than 1 pip (and, by the way, is actually tradeable in normal human reaction speeds).
My definition of a scalper is not someone who attempts to make small profits in a small period of time. It is someone who only ever trades when he can see that our price (on CS' platform) is marginally slower than on his DMA screen and continually takes advantage of it. I am really sorry if clients cannot get their heads around this. Every time a client trades with us he is making a bet (and so are we) the chances of either of us winning are about 50/50 (minus the spread which is, admittedly, in our favour). If a client only ever trades when he is guaranteed a profit (i.e. in terms of horse racing, managed to place a bet after the race has already been run) at our expense why should we accept his trades? If we acted like this and only ever allowed clients to make trades when the market has already moved in our favour the regulators would be breathing down our necks and the FOS would be fining us every other week.
The one undisputed advantage of DMA access is that you can (very occasionally) get filled on the bid or offer side without the market actually going through your price. But in reality this is not much of an advantage as, if you sit on bids/offers hoping to be filled.. in general (a) you will only get your fill if the market goes against you (!) and (b) if you are right and the market does go your way it will nearly always do so without having first filled you on your order!
Simon
