Best Thread CMC Markets owner answers your questions

[gle101]

For the instruments I trade / bet (about 10 FX pairs) they have on average the best available spreads I've seen amongst the SB industry (ignoring WS zero spread pairs). Of course whether this is cheaper than trading futures (in terms of the tax advantage) will depend on various factors specific to the individual. For me spreabetting with spreads like those availabe with PS means that with the tax advantage the overal cost saving is significantly greater than the costs associated with trading with the likes of IB.

Could be the case on the FX pairs, I trade the indices and when it comes to these instruments they are quite expensive.

 

[PC at CMC Markets]

Hi paul
Thanks for blog and yes we will be adding more and more products. last count was around 3000 instruments including more stocks, more commodities, more forex pairs and also some index products that no body else quotes.
Next gen is a gradual release because we want to automate pricing, execution and no requotes that is why we have to test every instrument before we release it, both individually and collectively.
what we are aiming to do is to give you over 4000 real time trading instruments that you can trade on and get executed electronically with no dealer intervention across all times of markets and definitely no requotes and ticket cancellations.

I know we are still not there with next gen but we have a programme of releases which I believe will offer an unparalleled service in spread bet and cfds. we know what you want and we plan to release it.
watch this space because next year competition is going to hot up in our industry and i want to make sure we are leading the drive for a more automated service for the spread bet community.
Have to say I love what we are doing with technology so exciting and cannot wait for next gen releases around the world.
have a good weekend dont forget to put on your thermals.

cheers pc

Hi Peter.

Not sure if this has been answered allready. Will you guys be adding new stocks? I have heard that you will be adding 3000 new stocks in 2011. Having more stocks to choose from will sway me towards you as a broker

 

[PC at CMC Markets]

Hi Lovejoy
This is fair point. It probably also depends on frequency of trades. We will be reducing spreads next year on forex and other products including commodities and indices. we do not see competitors as the competition but major banks and exchanges on forex and other products and we will be driving our dealing spreads lower in time.
The reason we havent done it so far is that we have a lot of work to do on pricing which is being completed. We want to execute all products on the best spreads electronically without ticket cancellation and especially requotes. should see more improvements on pricing coming over first quarter next year. To be honest I want to have the best spreads on the best technology in the market. that is the aim and the investment we have made and the team I have there is really no reason we will not be able to achieve this.

cheers pc

E=lovejoy21;1358328]For the instruments I trade / bet (about 10 FX pairs) they have on average the best available spreads I've seen amongst the SB industry (ignoring WS zero spread pairs). Of course whether this is cheaper than trading futures (in terms of the tax advantage) will depend on various factors specific to the individual. For me spreabetting with spreads like those availabe with PS means that with the tax advantage the overal cost saving is significantly greater than the costs associated with trading with the likes of IB.[/QUOTE]

 

[PC at CMC Markets]

Hi Lovejoy
If we can achieve exchange comparable spreads on major products and you can spread bet on those with automated execution, that would be perfect, I guess because you would be tax free trading on exchange comparable prices. That is our aim. we have the technology..... only a matter of time.

cheers pc

Yeah I understood that, should have clarified it's 'DMA functionality' in that it has the same affect as if you were accessing the underlying market (i.e. you get the liquidity providers prices + the fixed spread added by PS) in terms of the tight spreads, instant execution , level 2 order book etc. Obviously you can only bet in contract sizes normally available on the underlying exchange i.e. the sizes that PA can hedge at.

Even with true DMA you are not accessing the underlying market yourself...the broker is doing it for you on your behalf, it's just you would pay commission instead of paying the spread...so I guess this is how PS can call it SB as they are taking your trade orders and just instantly hedging them and gaining from the spread rather than placing your trade directly through to the exchange and charging you a commission for it.

On a side note I checked out the demo platform...platform looks good, lots of bells and whistles if you utilise stuff like that. Operates fine in terms of speed of access.Being NND would suggest exeuction is consistently better (though being NDD doesn't really tell the whole story) than a traditional market maker with a dealing desk so I'll take CMC's word on that...so far all demo trades have executed fine. The spreads over a period of time are pretty average IMO compared to other SB market makers, nothing that stands out as being better than their competitors but Peter did say they would be decreasing spreads soon (I think I read that somewhere on this thread). So for me they would need to decrease the spreads to get me on board as I can get better spreads elsehwere...slightly better spreads combined with the execution advantage of being NDD and they would be added onto my SB list (I utilise 3 SB brokers at any one time).

 

[PC at CMC Markets]

Hi Love joy
The reason you have to deal with sb broker and you cannot dna spread bet I have explained previously. But to summarise, if you want the tax advantages of sb you have to bet with a bookmaker. in effect we are marketmakers but it is the same as book maker at horse track you transact with the sb firm. the sb firm has to make a price if they want you business.

if you look at spread betting over last ten years spreads have been getting better and better and I think the industry will get more and more competitive but this has to come through technology and efficiency otherwise sb firms will not be able to keep reducing spreads as the profits will be taken out.

what we are doing is really ramping up technology to attract business on very competitive pricing and technology is the foundation for this. I know we are not quite there yet but I am ex=forex trader from banking and I know we can achieve really good forex pricing and I know how to do it. it is a technology issue at the moment, not a commercial issue. once we get the technology pricing to the level we want then spreads will continue to improve. I promise you this.

have a nice day and good luck with your trading and thanks for the blogs.
pc

Thanks, I'll check out your spreads...if they are competitive then I'll defintely try out your platform and if execution is good then I'll add CMC to my list of SB brokers

I think the point I was trying to make was as follows:

You offer no-requotes i.e. you have no dealing desk (but you are still a market maker I presume from your comments?).

From what I understand an SB firm which offers DMA is not a market maker they are just offering the means to be able to make bets based on the underlying liquidity providers prices (with, some fixed spreads added on top to cover costs). Thus the only way a true DMA SB firm makes money is through the spread.

In order to do this the SB will not be able to offer 10p per pip prices etc. though as you can't 'bet' these low amounts with liquiditiy providers...hence why someone like Prospreads only offers 1.0 lot (i.e. $10per pip) increments on the spreadbetting as they offer DMA and you are essentially having access to the Currenex liquidity with small fixed spread added by PS.

Thus for me there is no difference between betting with an DMA broker and calling it betting and trading with a traditional STP broker apart from the mechanics on what you are technically doing i.e. betting on price movements on DMA and buying and selling currency on traditional Fx STP broker?

But as you mentioned and as I said above, this is quite niche as you won't appeal to the mass market with $10 or equavilent minimum bet sizes and bet increments of $10 etc too.

I presume the lack of true DMA SB firms is due to the fact that a large proportion of SB clients have very small accounts (relative to a professional trader) and there are few spreadbetters who have large enough accounts / spreadbet full time to make it worthwhile.

But NDD is certainly the next logical step forward IMO for the SB industry for it to attract seriuos 'spreadbetters' ... for most professional traders / spreadbetters the two big importants things they want in their broker is great spreads (as this is a direct cost of each trade) and great execution and great execution only comes with an NDD brokers or DMA where you never get requotes (and obviously the great spreads come with these type of brokers too).

Peronally I think the tax advantage of spreadbetting is over hyped. For the traditional spread better betting on short term moves (form what i've read most spreadbetters open and close bets ni the same day on average) across a range of the major FX pairs for example they'd be financially better of trading with an ECN broker and not spreadbetting as the more competitive spreads (and obvious execution advantage) overcomes any tax advantage.

 

[lovejoy21]

Hi Lovejoy
If we can achieve exchange comparable spreads on major products and you can spread bet on those with automated execution, that would be perfect, I guess because you would be tax free trading on exchange comparable prices. That is our aim. we have the technology..... only a matter of time.

cheers pc

Sounds good...yep a decrease in your spreads across the majors and a few minors (I always find the likes of EAUD and ECAD have spreads on market makers - both SB and non-SB of around 10 pips which is far too high compared to DMA, STP, ECN etc where you can get 4-6) and with your execution and platform it would be a no brainer to give you a go.

For me there are only 3 SB firms that I consider at the moment to be above the rest...ProSpreads because of their execution and spreads...but the drawback is only whole lot size trades, Worldspreads because of their zerospreads pairs (but how long they will do this for and obvious execution drawbacks - but been fine so far for me) and SML becuase of the MT4 option for any automated robot trading I want to run (though their spreads are average - but fixed which actually helps when running a robot etc). I've tried others like IG, Tradefair and Shorts^Longs ...all which were fine but there was no differentiation amongst them from the rest of the crowd.

With your next gen platform, the lack of requotes + speed of execution combined with future lower average + consistent spreads then you would be positioning yourself ahead of the main crowd IMO.

 

[PC at CMC Markets]

hi citizen
let me honest with you. market maker platform I really love it does a lot of nice things and there is a hard core of our clients that love and will always love it. However, not everybody can down load software on their works computer especially if they work in finance industry so we had to develop a really decent web based platform which we have done with our new platform, and also iphones app.
we looked at market maker technology which was originally built in 1994, 1995 and launched in 1996 and it really needed sorting out so instead of building a web front end for market maker we started again. Our next gen technology is much more flexible and i love to be honest.
Yes I agree it is annoying only having one screen and there is a launch for multiple screens coming in late January or February.
eventually next gen will do everything it needs to do and we are talking about first quarter next year to have it fully functional with all the bits and pieces.

I know you are not sold on it based on your blog but I can tell you that since we launched it there has been a very strong and robust uptake of the technology and we are seeing increased client numbers by a significant amount. just give it time and I am sure you will love it in the end.
many thanks peter

Hello Peter,

Good to have you on here and answer questions directly.

Only ever had one issue with CMC , Why on earth did u change your old Marketmaker platform to the new one you have now. Did you take any notice of customer views and complaints there?
Didn't you feel you were taking two steps backwards ?

It was at one time the best platform on the market, what do u think your competitive edge is now?

PS: I stopped using cmc when the new platform came in.

 

[PC at CMC Markets]

Hi lovejoy,
100 percent right and that is the objective.
Spread bet firms have to compete not with each other but with exchanges and ECNs and that I think has been lost on a lot of the Spread bet firms. CMC Markets want to compete with the best in spreads and technology and that means major exchanges and banks on tax free trading. Not other spread bet firms. ECNs and Exchanges should be the real competition for the spread bet industry.
Nothing annoys me more when I see spread bet firms hyping spreads, head line spreads and ridiculous fill or kill orders and special offers to open an account. come on guys the Spread bet firms have to wake up and compete not with each but with exchanges, ECNs and banks. The way to do this is not in the press with head lines, not with special offers that I think down grade the industry but with three things.... in this order.
1. technology
2. technology
3. technology
and if that doesn't work then 4. will be technology.

Spread bet firms in the future will have to execute without fill or kill, without re-quotes, on real tight spreads and without the hype because that is the line in the sand that CMC markets is making. spreads will become tighter and execution more efficient. After all the banks can do this with platforms like ready FX (Goldman) and autobahn (Deutsche bank) so why not the spread bet industry.
You heard it here first. watch the spread bet industry grow up over the next year and
you will see some really great pricing and execution from us and the spread bet industry will have to follow otherwise ... you know the rest
cheers pc

Sounds good...yep a decrease in your spreads across the majors and a few minors (I always find the likes of EAUD and ECAD have spreads on market makers - both SB and non-SB of around 10 pips which is far too high compared to DMA, STP, ECN etc where you can get 4-6) and with your execution and platform it would be a no brainer to give you a go.

For me there are only 3 SB firms that I consider at the moment to be above the rest...ProSpreads because of their execution and spreads...but the drawback is only whole lot size trades, Worldspreads because of their zerospreads pairs (but how long they will do this for and obvious execution drawbacks - but been fine so far for me) and SML becuase of the MT4 option for any automated robot trading I want to run (though their spreads are average - but fixed which actually helps when running a robot etc). I've tried others like IG, Tradefair and Shorts^Longs ...all which were fine but there was no differentiation amongst them from the rest of the crowd.

With your next gen platform, the lack of requotes + speed of execution combined with future lower average + consistent spreads then you would be positioning yourself ahead of the main crowd IMO.

 

[gle101]

Hi lovejoy,
100 percent right and that is the objective.
Spread bet firms have to compete not with each other but with exchanges and ECNs and that I think has been lost on a lot of the Spread bet firms. CMC Markets want to compete with the best in spreads and technology and that means major exchanges and banks on tax free trading. Not other spread bet firms. ECNs and Exchanges should be the real competition for the spread bet industry.
Nothing annoys me more when I see spread bet firms hyping spreads, head line spreads and ridiculous fill or kill orders and special offers to open an account. come on guys the Spread bet firms have to wake up and compete not with each but with exchanges, ECNs and banks. The way to do this is not in the press with head lines, not with special offers that I think down grade the industry but with three things.... in this order.
1. technology
2. technology
3. technology
and if that doesn't work then 4. will be technology.

Spread bet firms in the future will have to execute without fill or kill, without re-quotes, on real tight spreads and without the hype because that is the line in the sand that CMC markets is making. spreads will become tighter and execution more efficient. After all the banks can do this with platforms like ready FX (Goldman) and autobahn (Deutsche bank) so why not the spread bet industry.
You heard it here first. watch the spread bet industry grow up over the next year and
you will see some really great pricing and execution from us and the spread bet industry will have to follow otherwise ... you know the rest
cheers pc

Yes it sounds really good, it has been my prediction as well, in fact the industry have come a long way in just a few years. But is it possible without migrating to a variable spread?

 

[PC at CMC Markets]

Hi gle101
well in the real world spreads are variable, I mean, exchange prices are variable based on order driven service of supply and demand, ecns the same and banks and market makers only offer basically variable spreads. why would you expect it to be any different from spread bet firm providing they are offering exchange comparable prices.
so if you want the real world on sb on really competitive pricing then it can only happen on variable spreads. but lets be clear the variable spreads have to be comparable to exchanges and ecns and market makers and actually just as important is execution. no point in having good spreads if you cannot execute during voltaile periods. that is why technology is so important.

tks pc

Yes it sounds really good, it has been my prediction as well, in fact the industry have come a long way in just a few years. But is it possible without migrating to a variable spread?

 

[gle101]

Hi gle101
well in the real world spreads are variable, I mean, exchange prices are variable based on order driven service of supply and demand, ecns the same and banks and market makers only offer basically variable spreads. why would you expect it to be any different from spread bet firm providing they are offering exchange comparable prices.
so if you want the real world on sb on really competitive pricing then it can only happen on variable spreads. but lets be clear the variable spreads have to be comparable to exchanges and ecns and market makers and actually just as important is execution. no point in having good spreads if you cannot execute during voltaile periods. that is why technology is so important.

tks pc

I take that as a yes. In order for SB industry move forward, a variable spread is in the pipeline. I agree, how can you execute 100% without a re-quote, unless you have a wide or a variable spread.

 

[PC at CMC Markets]

it is a yes
tks pc

I take that as a yes. In order for SB industry move forward, a variable spread is in the pipeline. I agree, how can you execute 100% without a re-quote, unless you have a wide or a variable spread.

 

[gle101]

it is a yes
tks pc

Ok, thanks a lot.

 

[tar]

I take that as a yes. In order for SB industry move forward, a variable spread is in the pipeline. I agree, how can you execute 100% without a re-quote, unless you have a wide or a variable spread.

Slippage

 

[Ross Spur]

While I agree with some of what PC says, at the moment I think CMC will have a struggle attracting new customers or re-signing all those who drifted away. The spreads need reducing to equal the opposition on major FX pairs and indices, although a 'free money' account opening offer might at least tempt people to see if the platform is as good as claimed.

 

[gle101]

Slippage

Slippage right, not a problem with SB, as most of the SB give a re-quote. Ok if you buy a market order during important news releases, then you might run into problems getting a good price. But that holds true for the real market as well. It will not work for a SB to give too much slippage, but sure, it could become a more common ingredient if we want SB to reflect the real market in all its aspects.

 

[gle101]

While I agree with some of what PC says, at the moment I think CMC will have a struggle attracting new customers or re-signing all those who drifted away. The spreads need reducing to equal the opposition on major FX pairs and indices, although a 'free money' account opening offer might at least tempt people to see if the platform is as good as claimed.

I agree, you can have the best looking and most full featured platform in the world, but if the spread is not competitive enough you will not attract a broad base of SB clients. I am quite sure PC is fully aware of this fact, he say they will adjust the spread when all the technology pieces are in place. If this is the case I will for sure have a closer look at CMC SB platform in the month to come. Right now, there are just too many other companies out there with good platforms and attractive spread.

 

[fibbinstarchi]

Do you know what makes me laugh the most with sb firms? It's their excuses about slippage. You are trading 'their' own market, not the actual market, so there's no excuse for ANY slippage. So if you see a sb bookie broker advertising 1 pip spread on the Dow, I can pretty much say they will be slipping you so the actual spread increases to whatever they feel like at that time, the robbers. It comes down to who you want to give the % they rob off you, if you trade the real market you will find hardly any slippage but no games like sb bookies, but you pay tax, but trade sb, you will again be giving a % of your money to them. The choice is yours.

 

[gle101]

Do you know what makes me laugh the most with sb firms? It's their excuses about slippage. You are trading 'their' own market, not the actual market, so there's no excuse for ANY slippage. So if you see a sb bookie broker advertising 1 pip spread on the Dow, I can pretty much say they will be slipping you so the actual spread increases to whatever they feel like at that time, the robbers. It comes down to who want to give the % they rob off you, if you trade the real market you will find hardly any slippage but no games like sb bookies, but you pay tax, but trade sb, you will again giving a % of your money to them. The choice is yours.

Well if you trade the news you will for sure have problems. Otherwise, after 5 years of SB trading it is my experience that slippage is not a big problem. Constant referral to a dealer though, is a much more serious problem that the industry need to tackle.

 

[Ross Spur]

Well if you trade the news you will for sure have problems. Otherwise, after 5 years of SB trading it is my experience that slippage is not a big problem. Constant referral to a dealer though, is a much more serious problem that the industry need to tackle.

If everything goes through automatically, as CMC (and FXCM) promise, there shouldn't be any slippage or delays, but it seems you have to pay for the privilege in extra spread.