Hello
The simple answer is we do both, because we have to.
We offer two platforms to clients. One for FX/CFDs and the other for spread betting.
On both we allow people to trade from a small size upwards. On spread betting in the FTSE for example this is from 10 pence per point. I physically cannot hedge that size. The minimum I can hedge with the exchange is £10 per point. So we have to run a book and then hedge as and when we reach a position size that we can.
So we run a small book which we hedhe out when we reach limits that we are able to hedge. Also in an ideal world, clients will come on and buy and sell at the same time in similar markets thus negating the need for us to hedge and thus help us to keep our costs down. We may end up long the FTSE and short the DAX which certainly on an intraday basis menas we are flat as far as we are concerned.
The other point is that we offer fixed, tight spreads. To do this we cannot auto hedge, because the real world does not offer fixed spreads and we would lose money all the time. We offer this to help our clients and to stabalise what can be very volatile pricing. We then hedge out where we need to by covering combined exposures to a currency or market.
We always give our clients the best pricing we can and have their genuine interests at heart. If clients do want an STP (Straight Through Processing) FX platoform then we do offer this on our FX/CFD platform if they would rather have that, commission free.
I hope that helps.
Regards
SLM
Thanks for the reply. I think it's good to have the option of choosing an STP if one so wishes.