Best Thread CMC Markets owner answers your questions

[uchiki]

nodga,
I think that capitalspreads work in the way that you describe and that CMC charge you the same for shorts as longs. Back in post #608, I suggested to Peter that there shouldn't be a financing charge for short equities/indexes....

To be sure - because the financing works differently for different types of instrument - do what I did and open a demo account and go short and long overnight for each different type of instrument you might be interested in. Have a look the next morning at the History. The Bet Financing item will break down the % and cost for each instrument and all should become clear.
A nice nuance of not resetting the price of your holding by a rollover process is that if you hold a profitable bet for a number of days, the financing cost is based on the total original value less the margin, rather than the (original value + profit) less margin.
Hope that's of some use...

Hi Peter, thanks for your extensive reply!

So to apply this to an example if I held a sell of £10 per point on XYZ share at 100p and I have £100 in my account to cover the margin, you will apply overnight financing on the remaining £900 (the Bet Borrowing Cost).

Say the interbank lending rate is 0.5%, you add/subtract 2.0% for long/short (is that right, you maybe more or less than the 2.0%) so for my short position I will pay -1.5% on the £900 (roughly 3.7p a night).

Is that right?!

 

[PC at CMC Markets]

Hi Andy

Many thanks for taking the time to come to our offices. My pleasure to personally make you a cup of nespresso gold. Sorry you didnt like the lovely chocolate biscuit I provided that I had specially flown in from Milan for you. ha ha only joking.

I think you should also confirm to this post my typing ability because there have been one or two sceptics about whether I am actually posting the replies.

Glad Paul and Adam answered your questions and always a pleasure to engage with people that are interested in CMC.

Best regards and good luck with your trading. Peter

QUOTE=andyhawes;1437688]Hi Peter,

I just wanted to say a big thank you for taking the time to meet me in person at your offices today, and to honestly answer each and every one of my questions.

It's great that you are looking to create a spread betting platform that is future proof, and even better that you are willing to take on board constructive criticism from those of us that actually use it.

As I explained to yourself, Paul & Adam, there are a few niggles with the platform but it sounds like you have a long list of improvements in the pipeline.

Oh and the coffee was great by the way!

Thanks & Regards,
Andy.[/QUOTE]

 

[PC at CMC Markets]

Hi Uchiki

Many thanks for this post. I think it is sound advice.

regards Peter

nodga,
I think that capitalspreads work in the way that you describe and that CMC charge you the same for shorts as longs. Back in post #608, I suggested to Peter that there shouldn't be a financing charge for short equities/indexes....

To be sure - because the financing works differently for different types of instrument - do what I did and open a demo account and go short and long overnight for each different type of instrument you might be interested in. Have a look the next morning at the History. The Bet Financing item will break down the % and cost for each instrument and all should become clear.
A nice nuance of not resetting the price of your holding by a rollover process is that if you hold a profitable bet for a number of days, the financing cost is based on the total original value less the margin, rather than the (original value + profit) less margin.
Hope that's of some use...

 

[PC at CMC Markets]

Hi Nodga

The first part is correct that we will only apply financing to the £900.

The second part is slightly incorrect. The rate charged on the £900 will be the 0.5% lending rate + 2% CMC spread, so a total of 2.5%.

Therefore (£900 x 2.5%) / 365 = roughly 6.1p a night

hope that answers your question
thanks peter

Hi Peter, thanks for your extensive reply!

So to apply this to an example if I held a sell of £10 per point on XYZ share at 100p and I have £100 in my account to cover the margin, you will apply overnight financing on the remaining £900 (the Bet Borrowing Cost).

Say the interbank lending rate is 0.5%, you add/subtract 2.0% for long/short (is that right, you maybe more or less than the 2.0%) so for my short position I will pay -1.5% on the £900 (roughly 3.7p a night).

Is that right?!

 

[nodga2000]

Hi Peter, thanks for your response. So that I am 100% clear you apply +2% to the interbank rate even if you are short as per my example?

Sorry to labour the point and thanks again!

Hi Nodga

The first part is correct that we will only apply financing to the £900.

The second part is slightly incorrect. The rate charged on the £900 will be the 0.5% lending rate + 2% CMC spread, so a total of 2.5%.

Therefore (£900 x 2.5%) / 365 = roughly 6.1p a night

hope that answers your question
thanks peter

 

[andyhawes]

Hi Andy

Many thanks for taking the time to come to our offices. My pleasure to personally make you a cup of nespresso gold. Sorry you didnt like the lovely chocolate biscuit I provided that I had specially flown in from Milan for you. ha ha only joking.

I think you should also confirm to this post my typing ability because there have been one or two sceptics about whether I am actually posting the replies.

Glad Paul and Adam answered your questions and always a pleasure to engage with people that are interested in CMC.

Best regards and good luck with your trading. Peter

Hi Peter,

Sorry, I gave up chocolate about 20 years ago - have to watch my figure you know!

And yes folks, I can confirm that Peter himself is keying each and every one of the replies to these posts - and he is the fastest friggin typist I've ever seen in my life!

Also thanks again for the excellent explanation of CFDs Peter, and for the reading material - it certainly kept me busy on the train ride home.

If you're ever passing through Northants just let me know and feel free to pop in and I'll make you a coffee in return.

Cheers,
Andy.

 

[PC at CMC Markets]

Hi Andy
Glad I impressed you with my typing speed. I learnt when I was 15 in my first job at Western Union. I used to send telegrams on a teleprinter on the night shift,some times on Christmas day. Never lost the ability to type. can type over 80 words a minute without looking at the keys or screen. You saw it with your own eyes.

Thanks for invite but being a southern softy I prefer not to venture north of Watford
but when you get electricity up there let me know and might make the trip ha ha


thanks again for coming. I hope you enjoy the book ''CFDs for dummies'' that one of my team wrote.

cheers pc

Hi Peter,

Sorry, I gave up chocolate about 20 years ago - have to watch my figure you know!

And yes folks, I can confirm that Peter himself is keying each and every one of the replies to these posts - and he is the fastest friggin typist I've ever seen in my life!

Also thanks again for the excellent explanation of CFDs Peter, and for the reading material - it certainly kept me busy on the train ride home.

If you're ever passing through Northants just let me know and feel free to pop in and I'll make you a coffee in return.

Cheers,
Andy.

 

[tar]

Goodmorning Peter , here is a question from Simon he couldnt post it here :

"Just checked my CMC account and note that CMC are charging me 30% for financing long positions in WTI oil.

To put that into persepective, that's 30% per year on the entire worth of your position folks. Yep, at only £1 per point your position is worth £9000, so to keep a long position in WTI CMC will charge you an amazing £2700 per year for a £1 pp bet.

Another way of putting it is that your trading must make you (net after all losses etc.) 30% per year just to break even. How many people net 30% pa?

This is an unbelievable rate, I am utterly astonished at what is happening here.

I have a similar position open in the futures markets and it's costing me (effectively) zero . Let me explain this: CMC have abandoned futures bets for their new platform and replaced them with rolling cash bets, for which they charge a financing rate consisting of two elements: financing (which is the normal element you would expect consisting of the interest on the value of the position) and 'carrying costs'. Carrying costs are the problem.

While the financing element is broadly equal to the intrinsic interest charged within the futures contract (but slightly more expensive; this is in line with other spreadbetting firms), the 'carrying cost' would appear to be a bonus for CMC.

If a bet is taken 'old style' on a futures contract, the intrinsic cost of the bet will be roughly equal to the central banks rate (say 1%). A SB firm will add a few percent if they operate rolling cash bets instead of direct bets on the futures price, so you pay say 3%.

CMC are charging an additional 27.5% for the 'carrying cost'. Adding this to the extra 2% premium over the futures style bet nets them 29.5% for financing your bet (versus a futures bet).

These costs are crippling, no business can survive with these sorts of costs, nor can a trader.

As far as I can tell (further info has not been forthcoming after my phone call asking for precise information on how this charge is calculated) CMC claim this mirrors real-world equivalent costs for storage of the spot commodity and the such-like, which doesn't really wash I'm afraid.

CMC have abandoned many markets and all futures bets for the new platform. Spot bets would appear to be prohibitively expensive for non-day traders; futures bets, or futures derived bets are not available.

My advice would to be very careful before using a CMC new platform account - when compared to costs elsewhere, including their own MarketMaker platform which is being retired, the costs are prohibitive. A futures bet taken elsewhere will net you around an additional 30% per year in profits."

then he said :

" While I would like to pose my question to the other thread, unfortunately every time I submit a post it says it needs to be approved by a moderator.

As the moderators would appear to be on leave at the moment, according to another thread in the General section, it would seem my post is not likely to appear any time soon.

Hmmm.

Peter, if you're reading, would you care to comment on your financing rates of 56%. This is frankly only a way to show a customer the door; no-one is going to accept these kind of rates, you may as well just call them up and say 'sorry, but we don't want you as a customer'. It would be a more honest way of dealing with customers you don't want.

Simon "

 

[Ross Spur]

Hi PC
Bit confused by the oil markets shown on next gen. Brent seems straightforward, but what is CMC's Texas oil based on, because it doesn't seem to correspond to other SB's US Light Crude?

Still confused, as quotes are about $2.50 lower than April contract used by other SBs.:?:

 

[Simoh]

Thanks tar. More information about the rates I have been charged, including financing of 56% per annum on WTI crude, is in the thread titled

'CMC New Platform bet financing cost is over 30% !'

Simon

 

[PC at CMC Markets]

Hi Ross
Please see answer below.

See the attached spreadsheet showing charts of the forward curves (cash plus nearest 6 future contracts) for West Texas and Brent Crude Oil.

There is currently a contango market in West Texas crude, where immediate delivery is cheaper than future delivery.
The Brent crude market is backwardated, so immediately delivery carries a premium over future delivery. see attached
tks pc
View attachment CrudeOilForwardCurves.xlsx

Hi PC
Bit confused by the oil markets shown on next gen. Brent seems straightforward, but what is CMC's Texas oil based on, because it doesn't seem to correspond to other SB's US Light Crude?

 

[Ross Spur]

Hi Ross
Please see answer below.

See the attached spreadsheet showing charts of the forward curves (cash plus nearest 6 future contracts) for West Texas and Brent Crude Oil.

There is currently a contango market in West Texas crude, where immediate delivery is cheaper than future delivery.
The Brent crude market is backwardated, so immediately delivery carries a premium over future delivery. see attached
tks pc
View attachment 103794

OK, thanks PC.
Do you plan to add more oil markets to include a daily rolling based on future?

 

[PC at CMC Markets]

like what

OK, thanks PC.
Do you plan to add more oil markets to include a daily rolling based on future?

 

[PC at CMC Markets]

Hi Simon and Tar.

Many thanks for this excellent post and I have been out of the office for a few hours and I will post a response shortly. Just having my cheese and tomato sandwich.

But lets get one thing you are your factually wrong about futures not charting you a finance cost. Because the futures price is inclusive of the finance cost. That is why there is a premium to buy oil in the future against cash. I thought you knew this but dont worry i will post response soon. But please if you are going to criticise CMC lets get your facts right first.

Posting coming shortly

regards Peter

Goodmorning Peter , here is a question from Simon he couldnt post it here :

"Just checked my CMC account and note that CMC are charging me 30% for financing long positions in WTI oil.

To put that into persepective, that's 30% per year on the entire worth of your position folks. Yep, at only £1 per point your position is worth £9000, so to keep a long position in WTI CMC will charge you an amazing £2700 per year for a £1 pp bet.

Another way of putting it is that your trading must make you (net after all losses etc.) 30% per year just to break even. How many people net 30% pa?

This is an unbelievable rate, I am utterly astonished at what is happening here.

I have a similar position open in the futures markets and it's costing me (effectively) zero . Let me explain this: CMC have abandoned futures bets for their new platform and replaced them with rolling cash bets, for which they charge a financing rate consisting of two elements: financing (which is the normal element you would expect consisting of the interest on the value of the position) and 'carrying costs'. Carrying costs are the problem.

While the financing element is broadly equal to the intrinsic interest charged within the futures contract (but slightly more expensive; this is in line with other spreadbetting firms), the 'carrying cost' would appear to be a bonus for CMC.

If a bet is taken 'old style' on a futures contract, the intrinsic cost of the bet will be roughly equal to the central banks rate (say 1%). A SB firm will add a few percent if they operate rolling cash bets instead of direct bets on the futures price, so you pay say 3%.

CMC are charging an additional 27.5% for the 'carrying cost'. Adding this to the extra 2% premium over the futures style bet nets them 29.5% for financing your bet (versus a futures bet).

These costs are crippling, no business can survive with these sorts of costs, nor can a trader.

As far as I can tell (further info has not been forthcoming after my phone call asking for precise information on how this charge is calculated) CMC claim this mirrors real-world equivalent costs for storage of the spot commodity and the such-like, which doesn't really wash I'm afraid.

CMC have abandoned many markets and all futures bets for the new platform. Spot bets would appear to be prohibitively expensive for non-day traders; futures bets, or futures derived bets are not available.

My advice would to be very careful before using a CMC new platform account - when compared to costs elsewhere, including their own MarketMaker platform which is being retired, the costs are prohibitive. A futures bet taken elsewhere will net you around an additional 30% per year in profits."

then he said :

" While I would like to pose my question to the other thread, unfortunately every time I submit a post it says it needs to be approved by a moderator.

As the moderators would appear to be on leave at the moment, according to another thread in the General section, it would seem my post is not likely to appear any time soon.

Hmmm.

Peter, if you're reading, would you care to comment on your financing rates of 56%. This is frankly only a way to show a customer the door; no-one is going to accept these kind of rates, you may as well just call them up and say 'sorry, but we don't want you as a customer'. It would be a more honest way of dealing with customers you don't want.

Simon "

 

[Simoh]

Look forward to the explanation, but I just don't see it. A 50% premium on $90 oil is $45. Futures prices aren't $135.

Simon

 

[PC at CMC Markets]

hi Simoh
you will when I post my reply
tks Peter

Look forward to the explanation, but I just don't see it. A 50% premium on $90 oil is $45. Futures prices aren't $135.

Simon

 

[scose-no-doubt]

Look forward to the explanation, but I just don't see it. A 50% premium on $90 oil is $45. Futures prices aren't $135.

Simon

That 45 is annualised. You need to use the price for mar 12 to compare like for like for your argument.

Will be watching with interest.

 

[Ross Spur]

like what

At the moment, Light Crude, April, same as all the others quote.

 

[tar]

Hi Simon and Tar.

Many thanks for this excellent post and I have been out of the office for a few hours and I will post a response shortly. Just having my cheese and tomato sandwich.

But lets get one thing you are your factually wrong about futures not charting you a finance cost. Because the futures price is inclusive of the finance cost. That is why there is a premium to buy oil in the future against cash. I thought you knew this but dont worry i will post response soon. But please if you are going to criticise CMC lets get your facts right first.

Posting coming shortly

regards Peter

I know the difference between futures pricing and spot prices , i wanted to help Simon to post his question , but anyway if it will cost 50% then it is expensive , Mar12 is at 102 $ , Jul11 is at 104 and Apr11 is 101.5 $ , seems it will be costly to hold long term with CMC , anyway no critisim intended waiting for your reply .

Regards

 

[Simoh]

That 45 is annualised. You need to use the price for mar 12 to compare like for like for your argument.

Will be watching with interest.

Thanks scose-no-doubt, realised this 30 secs after I posted but can't be at PC full-time.