Different names same underlying company

[alanp314]

Why is it that when you think there is a new company setting out into the Spread betting arena it turns out to be CMC Markets, as an example.

Why do they do it.......First thing I look for is the small print at the bottom to see who the accounts are handled by.

Why bother setting up all these different companies just to go through the same people.

Can someone explain this one to me please......

Thankyou

Alan

 

[jpu1978]

Most SB companies white label their trading platforms. They generally are separate companies but just use people like CMC or Capital's platform. Look at ETrade. They are a big(ish) spread betting company that uses someone elses white label platform, I think they use Saxo.

 

[ns1000]

Why is it that when you think there is a new company setting out into the Spread betting arena it turns out to be CMC Markets, as an example.

Why do they do it.......First thing I look for is the small print at the bottom to see who the accounts are handled by.

Why bother setting up all these different companies just to go through the same people.

Can someone explain this one to me please......

Thankyou

Alan

The infrastructure costs of setting up a new firm are substantial. Compare IG or CMC's websites to smaller SBs and you'll see more bells and whistles. If you want to set up a SB, it's going to be much cheaper to white label someone else's system. City Index in particualr have hods of white labels - just look on the FSA register under 'names' to see who they operate as.

From your point of view it means that if things go wrong, your SB has no commercial axe to grind to screw you. The white labeller has taken the exposure to the trade. Conversely it means that they can't just put your trade back in if stopped out wrongly.

Frankly, I'd stick with the big boys. The debacle at Global Trader says to me that it's safest to stick your money with somone properly capitalised, with proper risk control.

 

[whipsaw]

Frankly, I'd stick with the big boys. The debacle at Global Trader says to me that it's safest to stick your money with somone properly capitalised, with proper risk control.

I agree with you in all points except your explanation concerning Global Trader.
GTE was not a White Label, they managed there own risks - but as we have learned - not very well.

It is definitly a good advise to stick with the Top players.
But dont forget 1 single Trader hit SocGen with 6 Billion $$$, 2nd largest french Bank.
MF Global, Market leader in Derivative Trading loss ~ 140 Million through the failure of one single Dealer.

The danger is omnipresent and to be honest, the recent (as well the coming) downmoves will produces similar headlines like we have read from GTE.

 

[gle101]

The problem with spread betting companies is, that clients accounts are not insured. Even if the money is placed in separate "ringfenced" accounts. It still means that if the SB company goes bankrupt, one will probably lose the money. Please correct me if I am wrong on this assumption. It is therefor wise, if one has a lot of money to invest, to avoid depositing them all with a single SB company.

 

[ns1000]

The problem with spread betting companies is, that clients accounts are not insured. Even if the money is placed in separate "ringfenced" accounts. It still means that if the SB company goes bankrupt, one will probably lose the money. Please correct me if I am wrong on this assumption. .

You are wrong here. If your funds are held in a properly segregated account, if the company goes bust, the creditors cannot touch them. They are not company assets, but customer assets. If they're not segregated, they are treated as company assets.

 

[shadowninja]

Surely the best move would be to not put your entire funds into any account; just enough to trade and a little bit more. Example: you have £30k funds to play with; you want to risk 1% on each trade; you deposit £1k which is good for 3 losing trades; if you wipe that out, you deposit another £1k.

 

[Crap Buddist]

"Different names same underlying company"

What is in a name, that which we call bookies platform by any other doth still maketh it crap!

Traders Poet

 

[gle101]

You are wrong here. If your funds are held in a properly segregated account, if the company goes bust, the creditors cannot touch them. They are not company assets, but customer assets. If they're not segregated, they are treated as company assets.

From a legal point of view, are you 100% sure about this? What is the reason for a company like Interactivebrokers to insure their clients funds, if a "ringfenced" account would offer just as good security?

 

[ns1000]

From a legal point of view, are you 100% sure about this? What is the reason for a company like Interactivebrokers to insure their clients funds, if a "ringfenced" account would offer just as good security?

There are different rules in the US. IB's site is geared towards US investors, and contains US bank details. I don't have an account with them, so can't really comment on what they do. However, a segregated account in the UK contains customer funds which, in the event of the company going under, are ringfenced as the customers. The firm should receive confirmation from the bank that this is the case - although European banks can be reluctant to do this; the concept seems alien despite being enshrined in MiFID.

That the funds are segregated does not necessarily protect the investor from bank default; if your seg funds are in Lloyds, and Lloyds goes under, you could lose them. A seg account with thet People's Bank of Rutland probably isn't worth too much

 

[gle101]

There are different rules in the US. IB's site is geared towards US investors, and contains US bank details. I don't have an account with them, so can't really comment on what they do. However, a segregated account in the UK contains customer funds which, in the event of the company going under, are ringfenced as the customers. The firm should receive confirmation from the bank that this is the case - although European banks can be reluctant to do this; the concept seems alien despite being enshrined in MiFID.

That the funds are segregated does not necessarily protect the investor from bank default; if your seg funds are in Lloyds, and Lloyds goes under, you could lose them. A seg account with thet People's Bank of Rutland probably isn't worth too much

Thanks a lot for your reply. I will investigate this further as the issue of secured accounts in case of bankruptcy is quite important. There is also the aspect of open positions if a SB company goes bankrupt, whether these open positions are safe, and regarded as assets belonging to the client.