The truth about trading arcades

[police]

Apart from the regulatory aspects of client seg. It is worth considering what leverage you get from the arcade if they back you as compared toif you are self-backed.

For example, If i have £10,000 and am 100% then my allowable size may be say 10 lots

If I have £10,000 in a 50/50 trading account it may be that my limits are considerably higher, maybe even as much as 50 lots.

Before anyone screams at me, I am aware and so should the reader be, that this is totally dependent upon which arcade and what kind of leverage they offer individually. The important thing to note here is the principle.

 

[JTrader]

Hi

Lets say I want to be fully backed (50/50 split of profits) or, partially backed (3* leverage, and a 70/30 split of profits in my favour) by a trading arcade so that I have starting capital of £50,000.

In order to avoid paying 40% tax on sizeable profits I do not want to trade direct access, but would prefer to trade "direct access" spreadbets with twowayfutures, who make a profit from offering wider spreads than the underlying.

The trading arcade/trading firm will still be profitting from my expected and legitimate profits.

The best thing to do is phone around I suppose, but do any of you traders with arcade experience think that trading arcades - trading firms are likely to buy such a proposal?
if not, why not?

Perhaps some arcades would buy this proposal, but other arcades would not, depending upon their size, stature reputation?

I'm sure I've read/seen information indicating that some trading arcades/firms include trading spreadbets within their provisions?

Thanks
jtrader.

 

[martin brown]

In order to avoid paying 40% tax on sizeable profits I do not want to trade direct access, but would prefer to trade "direct access" spreadbets with twowayfutures, who make a profit from offering wider spreads than the underlying.

"direct access" speadbets?

i hope for your sake you are joking!

try that line at any arcade interview and you will get laughed out of the building!

 

[Directional]

"direct access" speadbets?

i hope for your sake you are joking!

check out two way futures.

I've been wondering lately why someone hasnt setup an arcade working on the direct access SB wrapper principle, in view of the recent HMRC clarification on "systematic gambling".

For profitable prop traders, it'd surely be an awesome idea - trade at an arcade, but dont pay tax.

I did hear on the grapevine that League Traders were setting up an SB division to allow their traders to trade equities under an SB wrapper to avoid tax, but havent heard how far they had got with that.

 

[martin brown]

check out two way futures.

I've been wondering lately why someone hasnt setup an arcade working on the direct access SB wrapper principle, in view of the recent HMRC clarification on "systematic gambling".

For profitable prop traders, it'd surely be an awesome idea - trade at an arcade, but dont pay tax.

I did hear on the grapevine that League Traders were setting up an SB division to allow their traders to trade equities under an SB wrapper to avoid tax, but havent heard how far they had got with that.

Well, i have to say i'm shocked that an "arcade veteran" such as Arbitrageur has such high regard for SB companies!

I thought these were just bucketshops. How fast is exceution like at twowayfutures?

Do you have an account there?

What are the execution/fills like in a volitle market / breakout?

 

[Directional]

I dont have any regard for Sb firms in general, at least, not the conventional type. TwoWayFutures is the exception - they are direct market access - as in, you trade on the underlying futures as you would with say IB, Man or TradeStation. They add the commission on as a "spread" so although you are trading on the underlying, they use the "loophole" of SB legislation to enable direct access futures trading as SB and tax exempt.

The recent clarifications in betting legislation at the HMRC website mean that any profitable futures trader should be considering his taxation options: http://www.hmrc.gov.uk//manuals/bimmanual/BIM22017.htm

especially since TWF have top level volume rates that are not dissimilar to the rates you'd see at an arcade

 

[martin brown]

I dont have any regard for Sb firms in general, at least, not the conventional type. TwoWayFutures is the exception - they are direct market access - as in, you trade on the underlying futures as you would with say IB, Man or TradeStation. They add the commission on as a "spread" so although you are trading on the underlying, they use the "loophole" of SB legislation to enable direct access futures trading as SB and tax exempt.

The recent clarifications in betting legislation at the HMRC website mean that any profitable futures trader should be considering his taxation options: http://www.hmrc.gov.uk//manuals/bimmanual/BIM22017.htm

especially since TWF have top level volume rates that are not dissimilar to the rates you'd see at an arcade

Arb, you do have an account there, and have you traded them in volitle markets?

is it fixed spread? (if so then its BS. imvho)

 

[Directional]

Arb, you do have an account there, and have you traded them in volitle markets?

is it fixed spread? (if so then its BS. imvho)

I dont have an account there yet, but I've been doing my homework as its an option I'm considering.

its not fixed spread - the spread and size is whatever you see in the market depth via the book. You access and trade on market depth via a ladder as you would with any direct access futures broker.

 

[martin brown]

I dont have an account there yet, but I've been doing my homework as its an option I'm considering.

its not fixed spread - the spread and size is whatever you see in the market depth via the book. You access and trade on market depth via a ladder as you would with any direct access futures broker.

Arb,unless you have traded with this SB company then it would be foolish to draw such conclusions!......"all that glitters is NOT gold"...

"Incredibly low commissions charged in the form of a fixed spread on the market price."

http://www.twowayfutures.com/spreadbetting-forex.html

the company website design is also poor, what does that say about the underlying buisness?

perhaps i am wrong, and this company is the FUTURE!

if that is the case, then lets hear the "Good time stories!"........

until such a time, i believe in paying for real direct maket access, real market spreads, real market commisions, with a real front end, with real support, in a real trading enviroment.

 

[TWI]

I've been wondering lately why someone hasnt setup an arcade working on the direct access SB wrapper principle, in view of the recent HMRC clarification on "systematic gambling".

This company exists and is based in Gib. Cannot remember their name but they provide software that gives real market prices and charge a small spread on each trade.

 

[A Dashing Blade]

Futuresbetting.com.
Using it as we speak.
Totally reccomend.

 

[Directional]

http://www.twowayfutures.com/spreadbetting-forex.html

That link is for forex, I'm talking about futures trading. There is no such thing as direct access anywhere in FX, whether its an FX bucket shop or a currency ECN. Stick with currency futures.

until such a time, i believe in paying for real direct maket access, real market spreads, real market commisions, with a real front end, with real support, in a real trading enviroment.

http://www.twowayfutures.com/Spreads Vs Futures.html

 

[charliechan]

how would this work if trading spreads? seeing as most arcade traders seem to trade spreads for a tick, adding a tick would surely make this a lot tougher.

someone mentioned a ladder earlier - how would that work if the inside quote is removed as the company makes its spread here?

just curious - i dont trade in an arcade or scalp.

 

[Directional]

the commission is added on as a spread - you trade the underlying at the futures market prices, but on your statement the prices are adjusted to reflect the addition of the commission to the spread - so say if euribor is sep6 is bid at 96.670, if you sold it at market on your statement your entry would be 96.66976 which reflects a €0.60c commission which is 0.00024 onto the market price.

 

[Parky]

Be warned, if you are spread betting your money is held by a company with a face value of very little, so you have absolute counterparty risk.
Also it is traded over the net meaning you are at the mercy of the internet, if a Septembet 11 happens you will be stuffed, the internet did and will again, in the same circumstances, grind to a halt. Although some people are making a living from spread betting, serious traders will continue to see the benefits of fixed line exchange traded solutions in terms of reliability ans security.
It is also expected that spread betting, as far as tax avoidance is concerned, is living on borrowed time and with the current US wrangling over internet betting in general and the punishment being dished out to shares in Bet on Sports and Partygaming attention will focus even more on these types of companies and their activities.

 

[charliechan]

thanks arb - looks like a good solution - i was assuming they would take a full tick on the spread making the arcade model a bit more tricky!

it seems they just call the commission a spread - tony bliar eat your heart out - traders spin better!

parky - valid points. but if your t1 is right into the sb company who have a t1 straight to the exchange....but you still need a solid platform rather than some java web based thing.

point about the usa screwing things up for us - i think the nat west 3 would agree with us on that.

how about the business model though? im sure a sb has to do more than call its commission a spread. doesnt it have to hedge itself in the market? i thought the very principal of a sb was the handicap that the best traders in the world like to put themselves under - you know - pay way more on a spread, have price misquotes regularly, stops ran more than in a fair market, mysterious platform crashes just before they can hit a submit button etc. after all, these sb companies like all bucketshops are out for your money as you are not trading in a real market as we know.

so how do these companies differ from the regular bucket shops? they cant be taking the other side of trades unless the majority of arcade traders are net losers - something the gaffers wouldnt care for too much.

guess i just dont know the truth about how these new sb companies make their money. would be interesting to find out.

 

[adrianbuthee]

Hello CharlieChan

It basically works like this...you trade on a futures trading platform and execute orders straight into the market. This trade is then instantly booked and allocated to your account as a spreadbet at the spreadbet price. The difference between the two being your spread rate. Commissions cannot be charged so a fixed quantity of spread is charged on the price at which you were filled in the market. The amount of spread charged is based on your monthly volume.

i.e. You buy FTSE at 5800 on Liffe. You are on band 2 and thus charged 0.25 per side, this means the trade is booked at 5800.25 and there is your spreadbet.

The hedge has been placed from the original trade and then booked as a spreadbet to your account. For the client, it is practically the same as trading the underlying futures, but as a spreadbet.

Trades are 100% hedged and no proprietary positions are taken, all the broker makes is the small, fixed amount of spread each time you trade.

There are video example on the website if you want to take a look (Not allowed to give a URL). I can also offer seminars and remote webinars for all those interested in taking a further look. Please PM me if so.

All the best

Adrian Buthee

P.S. Nothing wrong with re-inventing the wheel if it makes it more efficient!

 

[martin brown]

Hello CharlieChan

It basically works like this...you trade on a futures trading platform and execute orders straight into the market.

.
.
.

Trades are 100% hedged and no proprietary positions are taken, all the broker makes is the small, fixed amount of spread each time you trade.

I think this needs more explanation...

Do client trades ever reach the REAL market?

IF so, and TWF then ALSO takes the opposite side of clients positions (ie "hedge") in the REAL market, that would then double the costs of commission to TWF?

Unlike a real market trade which is matched "anomalously", SB client trades will have no effect on market supply & demand since in reality trades are matched with the TWF "hedge"?

If this is the setup then it is open to client abuse just like any other SB company.

Please Post TWF Terms & conditions for all to see and highlight those terms that sets TWF above the rest (i suggest you open this on a new thread in the SB forum, this is NOT the place).

 

[Directional]

I'm not sure what you arent getting about the TWF arrangement - consider them as a direct access futures broker, so if you understand how a normal futures broker works, you already know how TWF works.

The only difference is that the commission is charged as a spread added onto the price you got your fill on the underlying at.

Sold Euribor futures at 96.670 with a commission of 0.60c ... whether that commission comes out of the account as a "commission", or as a 0.00024 "spread" added onto the fill price, it still costs you 0.60c

 

[Farside]

Is anyone here famiiliar with equity prop/arcades? I'm in the US, and I hear prop traders trade 200K shares a day on NYSE, and make 1K to 2K (5 or 6 cents/share) doing it. What are they doing, buying the bid, sell the ask? Is there no directional trading involved? Just curious if I go prop what I can expect.

Thanks