An 80-90% guarantee that the punter will lose seems pretty tempting. If SBs only made money from the spread, there wouldn't be dozens of them and Stuart Wheeler would be a lot less rich. Surely you're not saying that everything is hedged? I think zero spread (theoretically) will be available soon -- and punters will still mostly lose!
An 80-90% guarantee that the punter will lose seems pretty tempting. If SBs only made money from the spread, there wouldn't be dozens of them and Stuart Wheeler would be a lot less rich. Surely you're not saying that everything is hedged? I think zero spread (theoretically) will be available soon -- and punters will still mostly lose!
kimo'sabby
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Originally the spread acted as a commission, the tax free element enticed investors to deposit money with the SB firms which the SB firms would then use themselves.
Spread betting firms take on a considerable amount of risk themselves, they offer a price, you take it, it's up to them how they operate.
Don't forget, the SB firms are big concerns, Cantor Fitzgerald etc, they are involved in the markets for real, they are set up to handle any eventuality and to make money.
They don't need to rip people off.
That was my point, really; ie, even with zero spread the majority of punters would still lose because they'd still adopt the same strategy.
Has anyone actually traded £500pp with a spread better - there can't be many people taking the other side of that position, wouldn't you have to start trading in the real market?
£500pp on GU is £7.5m in the real market place with the leverage.
£500pp on GU is £7.5m in the real market place with the leverage.
I think SB companies should be more transparent in their customer dealings and how they actually make their money. They all tend to trot out the notion that they make their money from the spreads. Patently, this is completely untrue.
Caveat emptor hardly applies when one cannot find out what the TRUE caveats are.
Betcha there are some sharks, even among the FSA regulated companies.
Caveat emptor hardly applies when one cannot find out what the TRUE caveats are.
Betcha there are some sharks, even among the FSA regulated companies.
neil
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Originally Posted by Chartsy
"in the unlikely even that someone trades £500 a point and makes £20k a day with a spreadbetting firm- where is the limit? surely they wouldn't let you take millions a year?
has anybody had such problems?
now seriously"
Spanish might know ?
:whistling
"in the unlikely even that someone trades £500 a point and makes £20k a day with a spreadbetting firm- where is the limit? surely they wouldn't let you take millions a year?
has anybody had such problems?
now seriously"
Spanish might know ?
:whistling
You could ask the same for the CFD and spot forex companies.
charliechan
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i know for a fact that sb's do not hedge the majority of business. they have no need to. they know the following fact:
80% of customers will lose their margin deposit in 6 months through the use of stops or simply poor judgement. the revolving door of members on t2w is evidence of this. the gambling urge of the public in their belief of quick money while paying large spreads ensure this.
the other 20% will either damage their account so badly and just leave the remainder with the SB, or refund only to lose again. 5% may make money in which case they may hedge if the exposure is large enough. generally however there is no need to do this because the order book will generally balance itself to a large degree. if it doesnt, they will adjust the quotes to make the side in need of balance more attractive.
the sb company will also pick up & keep interest from aggregate customer deposits and also trade a large fraction of the deposits in their own book - on the understanding that it is extremely unlikely that all customers will want to close their accounts tomorrow - just like banks and insurance companies will invest customers deposits/premiums. free money!
i have this info from an exec of one of the larger sb firms a few years back at an industry event/party.
80% of customers will lose their margin deposit in 6 months through the use of stops or simply poor judgement. the revolving door of members on t2w is evidence of this. the gambling urge of the public in their belief of quick money while paying large spreads ensure this.
the other 20% will either damage their account so badly and just leave the remainder with the SB, or refund only to lose again. 5% may make money in which case they may hedge if the exposure is large enough. generally however there is no need to do this because the order book will generally balance itself to a large degree. if it doesnt, they will adjust the quotes to make the side in need of balance more attractive.
the sb company will also pick up & keep interest from aggregate customer deposits and also trade a large fraction of the deposits in their own book - on the understanding that it is extremely unlikely that all customers will want to close their accounts tomorrow - just like banks and insurance companies will invest customers deposits/premiums. free money!
i have this info from an exec of one of the larger sb firms a few years back at an industry event/party.
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not surprising. I think the FSA mandatory requirement is min 5% of the net direction must be hedged...something like that.
This is all totally incorrect. The complete opposite of what you posted above is actually true. Spreadbet companies make their profits primarily out of clients losses.
You have to remember that the spreadbet, if a decent one, actually matches your bet with another trade on the system, ie the underlying liquidity. This is why you will sometimes see pending statuses for orders on some instruments whereas FX trades are filled almost instantly - it's no different in that respect to the underlying market just that they are matching the derivative.
If the word bet was omitted you wouldn't have all these arguments and posts but it's the ease of trading and small size accounts that attracts unsuspecting punters. It's a zero sum game, the brokers make their money from commissions and has been that way for a long time.
I'm afraid hes right, just like any other bookmaker or casino does. Some win some lose but the house has the edge. Did you ever wonder why spreadbet companies are required to have a bookmakers licence?
Ask yourself this:
someone places a trade at a CFD broker and loses 100pips.
someone places a trade at a spread bet compnay and loses 100 pips.
someone places a trade at a spot forex broker and loses 100 pips.
So, they're all bad, correct
Let's just give up trading.They have bookmakers licences because it's covered under gambling law as a derivative but they have FSA licences too.
windsurfing_stew
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Most spread betting companies have an upper limit on your trade.
Nearly all have an approval process where your orders need to be confirmed by their desk before they are executed. This time may be longer for bigger trades.
Contrary to popular belief, spread betting companies are quite happy for you to win. They generally carry a neutral book meaning that if you spread bet long 1000 tesco shares then they will also be long 1000 tesco shares with the market leaving them risk neutral (approximately). However they want you to keep trading (and making money on spreads) so having you win is in their interest.
Nearly all have an approval process where your orders need to be confirmed by their desk before they are executed. This time may be longer for bigger trades.
Contrary to popular belief, spread betting companies are quite happy for you to win. They generally carry a neutral book meaning that if you spread bet long 1000 tesco shares then they will also be long 1000 tesco shares with the market leaving them risk neutral (approximately). However they want you to keep trading (and making money on spreads) so having you win is in their interest.
philhackett
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:cheesy:
in the unlikely even that someone trades £500 a point and makes £20k a day with a spreadbetting firm- where is the limit? surely they wouldn't let you take millions a year?
has anybody had such problems?
GFT.UK do not have a limit.
windsurfing_stew
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GFT do on some instruments. Refer the below market information sheet under min/max column.
http://www.gftuk.com/spreadbetting/market-info/commodities.asp
http://www.gftuk.com/spreadbetting/market-info/commodities.asp
They may not have an upper limit, but their fills are so slow even at the lower limit that I can't see why you'd want to use it.
You're kidding right? You want slow...try any of the web based brokers.
And if you're getting slow fills, stop using market orders...what do you expect.
nothing should be slow ,at all, on a SB platform.
i lol at the fact that IG can offer a guaranteed stop loss but can't offer guaranteed buy/sell stops...even though they are the same thing...
The idea is that they don't want to offer anything that might make it easier for the punter to make a profit.
