Best Thread CMC Markets owner answers your questions

[oiltanker]

isn't the edge showed in that some sb are so confident people will lose that they offer £100 free money? The 'edge' is human error [greed and fear]. That is enough to make a good living by the looks of it regardless of the spread?

 

[PC at CMC Markets]

Hi Ross
you are assuming that trading is an exact science and all prices are the same all of the time. There is no evidence that by dealing with a firm on tighter spreads that you will save money all of the time on all trades. So your calculation of saving money by multiplying the spreads etc does not stand up. why because the markets are constantly moving and it depends on the price the spread bet firm is quoting and what their position is and the state of the market at the time of your bet.

If the spread bet firm has a long position they will move their price lower to attract buyers and to do this they will adjust their price to suit their book. If the markets are volatile then the spread bet firm will adjust its price to match up to the volatility in the markets. eg. they will lower prices quickly if market is dropping or push them up if markets are moving up quickly. This is normal market practice and happens all the time across all market asset classes. It is how banks and exchanges operate. pricing is not an exact science and spreads get nullified depending on the book of the spread better and the state of the markets. I thought you knew this Ross so I am surprised you came up with the calculation in your last blog.
hope that helps
tks Peter

UOTE=Ross Spur;1373300]Agree again. If you make, say, fifty trades a week and pay twice the spread every time, that's fifty or more pts/pips down the drain. Hardly insignificant.
Incidentally, GFT and IG (Deal Thru) also have direct chart trading, gle, although IG's was unusable, I found. Maybe it works now, but I don't want to use my money finding out.[/QUOTE]

 

[PC at CMC Markets]

hi oiltanker
depends how big the firm is. I suppose if you are small firm you can afford to run the risk of clients losing money but we have big turnover, capital adequacy requirements and we generally hedge between 80 to 90 percent of our business. the balance is more or less natural hedging between clients whereby we can capture the spread.
The bigger the firm the more stable the pricing in my opinion because the bigger the book the less a client position will have on your price making. so if you have lots of two way flow then there is natural hedging. if you have a small client base then positions can whip around quickly.

in my opinion the reason clients lose money is primarily over leverage not getting the markets wrong. that is why in our next generation software we have built in an automatic margin stop loss on every trade (you can switch it off if you like) and an automatic profit take which is two times the margin. You can adjust these to any levels your want manually.

as a firm we genuinely want our clients to make money because in the long run it is better for everybody that way. we get to keep the client, they do more and more trades and our turnover increases and so do our profits.

so my view is that spread bet clients should bet with margin stop losses, keep the margin stop loss switched on at all times and do not over leverage.

hope that helps thanks for taking the time to blog.
peter

isn't the edge showed in that some sb are so confident people will lose that they offer £100 free money? The 'edge' is human error [greed and fear]. That is enough to make a good living by the looks of it regardless of the spread?

 

[SpreadBeta]

Peter, firstly thanks for taking the time to get involved in these forums..

I am slowly coming round to the new Nextgen platform, having spend many years using & generally being happy with Marketmaker. However having played with Nextgen for a bit, I have a few few comments / questions / concerns I would like to feed back :

a) One of the benefits of Marketmaker (for me at least) was you could both search by & SEE the Ticker for any share you wished to trade. On Nextgen you seem to be able to search by ticker/epic for say RDSB (Royal Dutch Shell B share) but nowhere can you I find the ticker for the share (even on the overview page !!!). This means for some items e.g. "US Small Cap 2000" Index once selected I can ony see that CMC say in its description that it is an index "similar to the Russell 2000" (but not the Russell 2000) but dont actually give the Ticker to clearly identify what it actually is, for it so finding it external tools e.g. Sharescope, Metastock etc is a bit hit & miss. As you ramp up to 3000+ Instruments this ambiguity will increase, so any chance in showing the Instrument Tickers on the Overview page ?

b) I know you have said that you are planning to expand the instruments in Nextgen over the next few months but are you able to indicate at this stage whether you will for instance at LEAST be offering all the FTSE 250 & Smallcap shares you current have available in Marketmaker i.e. Nextgen will eventually catch up and overtake Marketmaker’s scope (or are you planning to only offer a subset of the LSE shares available in Marketmaker, even in the longer term so using the Nextgen switchover to help rationalise you current instrument list ?)

c) In Marketmaker & Nextgen at present the prices you show/offer include a fixed CMC spread over the LSE market prices, as expected. However CMC do not always seem (at least on the Smallcap shares on Marketmaker) to use the current LSE Market Bid/Offer prices as a starting point before adding your spread !!. I am looking at an example now on LSE where there is a Market Maker on the offer showing 1000 shares at 517p, with a second offering 2500 at 519.5 and CMC's Marketmaker system is showing an offer price of 520.02 (i.e. 519.5 + CMC's spread).
A lot has been discussed on this thread re:SB tighter spreads & in particular consistent/reliable pricing which I agree with, and with that in mind are you able to say if the new platform will more accurately reflect the current LSE Market Bid / offer process before adding CMC's spread - even if you have to limit the £/point offered to achieve it. This, for me, would be the biggest step towards the consistent spreads objective you are looking to achieve on Nextgen.
As an aside IG, Spreadex and MF Global for example, may have wider standard additional spread charges than CMC - 0.25% either side, but they seem to reliably follow the underlying LSE prices before adding their spread, and don’t seem to requote if dealing in units of say only £5-10/point. (ignoring fast markets)

Anyway just a few comments / questions I thought I would feed back whilst reviewing the new Nextgen system against Marketmaker again today.

 

[Ross Spur]

Hi Ross
so I guess by your reckoning that the firm offering offering zero spreads is also offering best execution. planet and what spring to mind.

peter

No, that's not what I said. I haven't tried them recently, but the nameless SB offering zero spread used to have one of the worst platforms, so clients would probably lose money even if the spreads were negative!
From the punters' side of the fence, my observation is that the SB currently offering the tightest spreads on major indices and FX pairs also happens to have the best execution.
As you say, the most-traded markets tend to self-hedge, which is why SBs can offer spreads equalling the underlying instrument's. Relying on the fact that the majority lose, in any case, they can even offer tighter spreads than the underlying market, although I'd agree that zero has to be a gimmick.

 

[PC at CMC Markets]

feels like a back track to me.
so from your observations do you have a live account with us and have you included our executions and pricing in your observations because if you have not then it is very limited observation.

No, that's not what I said. I haven't tried them recently, but the nameless SB offering zero spread used to have one of the worst platforms, so clients would probably lose money even if the spreads were negative!
From the punters' side of the fence, my observation is that the SB currently offering the tightest spreads on major indices and FX pairs also happens to have the best execution.
As you say, the most-traded markets tend to self-hedge, which is why SBs can offer spreads equalling the underlying instrument's. Relying on the fact that the majority lose, in any case, they can even offer tighter spreads than the underlying market, although I'd agree that zero has to be a gimmick.

 

[Luc.Chase]

This is nothing new, why pay more than what you don't need to, it is just plain foolish, if you get same execution and service with others. The new generation platform is excellence (had to look it up), some new innovations for sure, and to tell you the truth I like it very much. But it is not enough if the spread doesn't follow. We are not asking for much, just the same pricing as a bunch of other SB's. With their wide spread IG let the smaller SB companies take market share for years . They eventually did wake up and I am quite sure CMC will not make the same mistake.

I agree, narrow spreads are very important. In the course of a year of day trading you can easily pay 50% of your account size in 'extra' spread alone.

 

[Ross Spur]

feels like a back track to me.
so from your observations do you have a live account with us and have you included our executions and pricing in your observations because if you have not then it is very limited observation.

Not trying to get into an argument here, but this is what I posted, which still seems clear, so I can't see why you think it's back-tracking:

Not mentioning any names, but in the last six months or so, I've found that the SB company generally offering the tightest spreads has also had the best trade execution. The platform isn't brilliant, but it works quickly and reliably, and has most features you need.
Given that my losses are at least 90% my fault, what is the incentive to try CMC next-gen, which at the moment has spreads twice as wide or more in some cases?

I do have an old-gen CMC account, but I gave up using it a couple of years ago because I found the platform(s) confusing and slow, and your customer service people didn't seem to know or care much about helping when things went wrong, which was quite often. That's why I'm wary of trying next-gen, although I'd probably give it a go if I could use it without opening a new account.
re. my 'limited observation', FWIW, I've had accounts with most SBs for about ten years, back in the days when the spreads were huge and the platforms routinely crashed! Everything is so much better now, which is why I think CMC next-gen will need competitive spreads as well as good execution to be a success.

 

[gle101]

I can promise you 100 percent that all spread bet deals done on the platform are automatically executed by the system. Dealers cannot override prices and there are no re-quote facilities and no dealer intervention or referral. Also I should add that if you deal on the phone with us the dealer has to quote the price on the system and the deal is executed on the system at the price being automatically generated. There is no facility for the dealer to quote you one price and put the trade through on the platform at another price to read you on the bet. The dealer can only execute the trade on the price being generated by the platform, the same price that all other clients are trading at regardless of whether they are buyer or seller. any other firm you know that does that. so when do we get our shining star.

Peter, I give you credit for posting this paragraph, and for this you definitively receive a shining star. Referral to a dealer is one of the worst aspect of the industry. I would say you are the first representative of the industry who has by this post taken a public stand against it. The only time one can accept referral to a dealer is when the order is huge and hedging could be a problem for the company.

 

[PC at CMC Markets]

Good morning gle101
Many thanks for the shining star I will place it alongside my scouts badge, pride of place.

Not only have we changed our software but we have changed the way we handle phone deals. we do not employ sales traders as such who quote prices off their own bat and run the positions, to make extra money out of the client. All telephone deals are processed through the next gen platform. so to be clear if a client rings up to bet we quote what is on the platform, even if the sales dealer knew the client was a buyer there is no point in the sale trader upping the bet price to make a few extra quid because he cannot process in a way that he captures a price difference. the sales trader quotes the price on the platform and hits buy or sell when the client tells him what he wants. whatever price the deal is executed at on the platform is the price the client gets. no dealer, no back office, no sales trader can over ride any prices that the system is quoting and no manual price adjustments can be made to the system. I believe this to be unique and no other spread bet company operates this way on phone traders. You see next gen is not just about technology it is about a new way to execute trades for clients that does not disadvantage them.

also dont forget all on line bets are processed this way. we agree with you that clients should not be referred to individual dealers for monitoring. we should be able to quote a price and deal on it. other companies either requote or fill or kill a ticket. killing a ticket merely means that the price has moved and they cannot execute the deal at the price you entered it at. with us we will fill every ticket, every trade, every time WITHOUT ANY DEALER OR MANUAL INTERVENTION.

it is about time this industry grew up and we have started the process. with next gen technology it is no longer acceptable for other spread bet companies to
1. re-quote
2. fill or kill tickets
3. refer deals to dealers
4. read clients on bets
5. not offer precision pricing
6. not offer automated execution.
7. not show real time charts of their spreads throughout the day.

So the above is the new standard for spread betters. In time the whole industry will operate this way because you the spread bet community will demand it because why would you put up with any other way to execute a trade when you can get all of the above.
You heard it here first. I think two stars are in order.

ashes have been won, cmc gets a shiny star and all is well in the world.
have a nice day
Peter

I believe this is unique in our industry. we no longer employ sales traders everything goes through the platform and all

Peter, I give you credit for posting this paragraph, and for this you definitively receive a shining star. Referral to a dealer is one of the worst aspect of the industry. I would say you are the first representative of the industry who has by this post taken a public stand against it. The only time one can accept referral to a dealer is when the order is huge and hedging could be a problem for the company.

 

[PC at CMC Markets]

Hi Ross
we always come back to spreads with you. see my comments to gle101
there is more to this industry than spreads. but anyway spreads are important I agree and the better the deal you can get the better for you but you have to take into account the other factors I wrote to gle.

have good day
cheers Peter

Not trying to get into an argument here, but this is what I posted, which still seems clear, so I can't see why you think it's back-tracking:

Not mentioning any names, but in the last six months or so, I've found that the SB company generally offering the tightest spreads has also had the best trade execution. The platform isn't brilliant, but it works quickly and reliably, and has most features you need.
Given that my losses are at least 90% my fault, what is the incentive to try CMC next-gen, which at the moment has spreads twice as wide or more in some cases?

I do have an old-gen CMC account, but I gave up using it a couple of years ago because I found the platform(s) confusing and slow, and your customer service people didn't seem to know or care much about helping when things went wrong, which was quite often. That's why I'm wary of trying next-gen, although I'd probably give it a go if I could use it without opening a new account.
re. my 'limited observation', FWIW, I've had accounts with most SBs for about ten years, back in the days when the spreads were huge and the platforms routinely crashed! Everything is so much better now, which is why I think CMC next-gen will need competitive spreads as well as good execution to be a success.

 

[PC at CMC Markets]

I do not agree with you. I believe we have the best execution and pricing
see my comments to gle101

tks peter

No, that's not what I said. I haven't tried them recently, but the nameless SB offering zero spread used to have one of the worst platforms, so clients would probably lose money even if the spreads were negative!
From the punters' side of the fence, my observation is that the SB currently offering the tightest spreads on major indices and FX pairs also happens to have the best execution.
As you say, the most-traded markets tend to self-hedge, which is why SBs can offer spreads equalling the underlying instrument's. Relying on the fact that the majority lose, in any case, they can even offer tighter spreads than the underlying market, although I'd agree that zero has to be a gimmick.

 

[PC at CMC Markets]

Good morning spreadbeta

Thanks for taking the time to blog will answer your points as follows.

will pass on your comments regarding tickets on overview page to the team. it is good point and lets see what we can do.

yes we will be offering ftse 250 and some small cap shares. not sure if we will offer the complete list of small caps but will let you know but there are a lot of new instruments coming and we should begin roll out this month.

definitely pricing will be more accurate. this is something we have been working on with next gen technology. of course because you are betting prices will not match exactly the market share price because we have to build commission into the spread. I think you will like the new instruments and pricing on next gen.

appreciate the time and effort you have put into looking at next gen. it will get better and better I promise

Have a nice day
regards Peter

Peter, firstly thanks for taking the time to get involved in these forums..

I am slowly coming round to the new Nextgen platform, having spend many years using & generally being happy with Marketmaker. However having played with Nextgen for a bit, I have a few few comments / questions / concerns I would like to feed back :

a) One of the benefits of Marketmaker (for me at least) was you could both search by & SEE the Ticker for any share you wished to trade. On Nextgen you seem to be able to search by ticker/epic for say RDSB (Royal Dutch Shell B share) but nowhere can you I find the ticker for the share (even on the overview page !!!). This means for some items e.g. "US Small Cap 2000" Index once selected I can ony see that CMC say in its description that it is an index "similar to the Russell 2000" (but not the Russell 2000) but dont actually give the Ticker to clearly identify what it actually is, for it so finding it external tools e.g. Sharescope, Metastock etc is a bit hit & miss. As you ramp up to 3000+ Instruments this ambiguity will increase, so any chance in showing the Instrument Tickers on the Overview page ?

b) I know you have said that you are planning to expand the instruments in Nextgen over the next few months but are you able to indicate at this stage whether you will for instance at LEAST be offering all the FTSE 250 & Smallcap shares you current have available in Marketmaker i.e. Nextgen will eventually catch up and overtake Marketmaker’s scope (or are you planning to only offer a subset of the LSE shares available in Marketmaker, even in the longer term so using the Nextgen switchover to help rationalise you current instrument list ?)

c) In Marketmaker & Nextgen at present the prices you show/offer include a fixed CMC spread over the LSE market prices, as expected. However CMC do not always seem (at least on the Smallcap shares on Marketmaker) to use the current LSE Market Bid/Offer prices as a starting point before adding your spread !!. I am looking at an example now on LSE where there is a Market Maker on the offer showing 1000 shares at 517p, with a second offering 2500 at 519.5 and CMC's Marketmaker system is showing an offer price of 520.02 (i.e. 519.5 + CMC's spread).
A lot has been discussed on this thread re:SB tighter spreads & in particular consistent/reliable pricing which I agree with, and with that in mind are you able to say if the new platform will more accurately reflect the current LSE Market Bid / offer process before adding CMC's spread - even if you have to limit the £/point offered to achieve it. This, for me, would be the biggest step towards the consistent spreads objective you are looking to achieve on Nextgen.
As an aside IG, Spreadex and MF Global for example, may have wider standard additional spread charges than CMC - 0.25% either side, but they seem to reliably follow the underlying LSE prices before adding their spread, and don’t seem to requote if dealing in units of say only £5-10/point. (ignoring fast markets)

Anyway just a few comments / questions I thought I would feed back whilst reviewing the new Nextgen system against Marketmaker again today.

 

[Ross Spur]

c) In Marketmaker & Nextgen at present the prices you show/offer include a fixed CMC spread over the LSE market prices, as expected. However CMC do not always seem (at least on the Smallcap shares on Marketmaker) to use the current LSE Market Bid/Offer prices as a starting point before adding your spread !!. I am looking at an example now on LSE where there is a Market Maker on the offer showing 1000 shares at 517p, with a second offering 2500 at 519.5 and CMC's Marketmaker system is showing an offer price of 520.02 (i.e. 519.5 + CMC's spread).
A lot has been discussed on this thread re:SB tighter spreads & in particular consistent/reliable pricing which I agree with, and with that in mind are you able to say if the new platform will more accurately reflect the current LSE Market Bid / offer process before adding CMC's spread - even if you have to limit the £/point offered to achieve it. This, for me, would be the biggest step towards the consistent spreads objective you are looking to achieve on Nextgen.
As an aside IG, Spreadex and MF Global for example, may have wider standard additional spread charges than CMC - 0.25% either side, but they seem to reliably follow the underlying LSE prices before adding their spread, and don’t seem to requote if dealing in units of say only £5-10/point. (ignoring fast markets)

Might this have something to do with Plus Markets? Some time back, trying to trade a share in the first half hour after the open, I noticed that while 'SB X' would stop accepting trades because it was in auction, 'SB Y' was still quoting prices, apparently because it was still trading on Plus Markets.

 

[PC at CMC Markets]

Hi Ross
To be honest I have no idea but if there is a price we should be able to execute on it.

peter

Might this have something to do with Plus Markets? Some time back, trying to trade a share in the first half hour after the open, I noticed that while 'SB X' would stop accepting trades because it was in auction, 'SB Y' was still quoting prices, apparently because it was still trading on Plus Markets.

 

[gle101]

Good morning gle101
Many thanks for the shining star I will place it alongside my scouts badge, pride of place.

ashes have been won, cmc gets a shiny star and all is well in the world.
have a nice day
Peter

Ha ha, you are welcome.

 

[PC at CMC Markets]

should have said all is well in the world apart from the weather.
cheers pc

Ha ha, you are welcome.

 

[gle101]

I do not agree with you. I believe we have the best execution and pricing
see my comments to gle101

tks peter

Well, 1 point spread (1 tick) on the futures (Dow) is pretty unbeatable I would say, don't you agree? Along with that comes excellent execution. I don't know how your competitor manage to do it, but apparently they can make it work, according to them a long term spread strategy for that particular instrument. They offer excellent spread on all other instruments as well that I am trading (indices). Why in the world would I switch to CMC (other than having an extra SB for hedging)? They don't have all the features you offer, pretty close though. Your service is simply not tempting enough Peter.

 

[gle101]

should have said all is well in the world apart from the weather.
cheers pc

Nice to see that you have humour, after being in this business for so long.

 

[PC at CMC Markets]

hi gle101

You have not understood my response. I did not say we had the tightest spreads, I said I believe we have the best execution and pricing.
Because our system is automated and there is no dealer intervention our execution I believe to be more efficient and faster. so I believe we have best execution because it is automated, no re quotes and no killing of tickets. execution is different from spreads.
I believe we have best pricing (not spreads) because our prices are derived automatically and computer generated with no dealer intervention. We also offer precision pricing. We may not have the tightest head line spreads but I believe that over a period of time even on our slightly wider spreads through our no dealer, automated execution and pricing engine the prices you execute at will match anybody and beat most.
also remember there are no re-quotes and more importantly we do not kill tickets when markets are volatile and we have precision pricing.
the whole point of my blogs was to high light the difference between headline spreads, pricing and execution and once again the point has been lost because we are discussing head line spreads again.

I am trying to take this industry to a higher level through execution and pricing and competitive precision pricing. no dealer intervention and no dealer referral and automated execution. yet these blogs always seem to come back to head line spreads.

I say it again. I believe we have the best execution, pricing on highly competitive precision pricing and I do not believe anybody can beat that in spread bet industry. I do accept that we do not have tightest head line spreads. however, would the competitors be able to offer 1 pip on the dow and all of the above. I do not know but it is a point worth thinking about.

thanks peter

Well, 1 point spread (1 tick) on the futures (Dow) is pretty unbeatable I would say, don't you agree? Along with that comes excellent execution. I don't know how your competitor manage to do it, but apparently they can make it work, according to them a long term spread strategy for that particular instrument. They offer excellent spread on all other instruments as well that I am trading (indices). Why in the world would I switch to CMC (other than having an extra SB for hedging)? They don't have all the features you offer, pretty close though. Your service i simply not tempting enough Peter.