Worldspreads upgraded!

[gle101]

The thing is you’re never going to beat DMA for price efficiency. By that I mean the tightest possible spread with instant execution. The transparency that you get with DMA is second to nothing. Psychologically you know that it is simply “You vs The Market”. This isn’t quite so with spreadbetting. Spreads are generally wider, prices can bias and executions can be interfered with. The upside with spreadbetting is obviously the tax free advantage on ‘winnings’ and also the ability to bet in non market size (ie minimum DMA on FTSE Futures is £10 per point as this is the smallest single contract). This is what obviously attracts the ‘beginner’ who doesn’t have $25,000+ to fund a direct access account.

In the last few years a few of the spreadbetting companies have taken things on a stage further with the invention of things like digital options (binary bets) and other derivative instruments that can not be found on any exchange. This is surely is the real growth sector? At the moment IG Index seem to be leading the way in this respect with a really wide range of interesting ways to bet on market movements. I would suggest that companies just starting to offer spreadbetting would have much catching up to do. In my opinion this is why WS have had to make such an offer on narrow spreads; it is the only way they could get their foot in the door so to speak. Weather they can continue to offer such a service remains to be seen. In my opinion it will come do to how they manage the more successful clients. It is fact that they can not hedge a client and make money from them with a 1 point spread on Dow or on GBPUSD. This means that the company will have to carry a certain exposure. As I have noted already, they only way for a company to succeed in such a situation is to increase the cost of trading to the client and the only way this can be done is by rejecting trading instructions and therefore negating the efficiency of a clients trading system or method.

There was an interesting article on Sky News last night, did anyone else see it? It was a report into the advertised costs of package holidays. It appears that travel agents advertise holidays in their windows along the lines of “Spain – 7 nights from £85 per person”. It turns out that it is impossible to get the holiday for that price. Whatever combination of flights / accommodation / meals / adults / children you choose results in the price per person being more than double the advertised price. Apparently in the world of the travel agent this is all perfectly legal! The excuse they offer is that most flights are subject to supplements of some kind as it costs different amounts to use different airports and also there are fuel supplements as the cost of oil is so high. There are also ‘adult supplements’ and ‘hotel supplements’ which all get added to the basic cost. The upshot is that it is a con pure and simple. The holiday being offered can not be booked at that price. I would suggest that the travel agents bend the law beyond what is reasonable in these cases. The lowest price advertised should, in my opinion, represent the lowest price available with the various additions considered. In some respects you can class spreadbetting in a similar manner. The costs which you see on the screen (ie just the spreads are not the only consideration that the customer needs to make if they are planning on being a successful spreadbetter!

Steve.

Thanks again for an interesting post.
I just have one question for you. How is it that the percentage of those that lose on DMA are almost exactly the same as that for SB? As I understand it, this is a statistical fact. Please correct me if you, or some other on this forum have different figures on the statistics. I have a feeling, that some of you guys portrait the DMA as being some kind of Holy Grail. All of us, who have been in the game for a while, know that it is not. In trading the DMA you have the commission that has to be calculated as being part of the spread itself. Yes I agree, the spreads at DMA look wonderful at times, if one views it only from that angle. Here again, as with SB, there are other factors that have to be considered as well. DMA absolutely has its advantages, but it is definitely not the right choice in all trading situations. Transparency of the DMA is an advantage, one is able to add automatic trading programs, API and so on. As said before, I think both business models have their advantages and disadvantages, and take their rightful place in the traders arsenal. Under certain trading conditions, DMA is absolutely a better choice. However, SB is to be preferred in other cases, and not only for the tax benefits, even if you have the funds needed to open an DMA account.

 

[gle101]

Wanted! Traders that trade live at Worldspreads!

Wanted! Traders that are trading live with Worldspreads. There are not that many on this thread that actually are trading live with WS. Please join this board and share your impressions. In recent days I think this thread has lifted to much higher standards, with very interesting posts and great content by many contributors, with good insight in how this industry works. Keep posting!

 

[laptop1]

Wanted! Traders that are trading live with Worldspreads. There are not that many on this thread that actually are trading live with WS. !

Correct I am not trading with them, I used to but its not through the want of asking to come back, so I cant real comment on the New Platform

......................................................................................................................................................................

Good post steve on pages #264 and #279

 

[FXSCALPER2]

It will absolutely make no difference at all what broker you use. a losing trader will lose trading DMA or SB, and a winning trader will win ttrading with any broker that I have experience with (a lot).

Thanks again for an interesting post.
I just have one question for you. How is it that the percentage of those that lose on DMA are almost exactly the same as that for SB? As I understand it, this is a statistical fact. Please correct me if you, or some other on this forum have different figures on the statistics. I have a feeling, that some of you guys portrait the DMA as being some kind of Holy Grail. All of us, who have been in the game for a while, know that it is not. In trading the DMA you have the commission that has to be calculated as being part of the spread itself. Yes I agree, the spreads at DMA look wonderful at times, if one views it only from that angle. Here again, as with SB, there are other factors that have to be considered as well. DMA absolutely has its advantages, but it is definitely not the right choice in all trading situations. Transparency of the DMA is an advantage, one is able to add automatic trading programs, API and so on. As said before, I think both business models have their advantages and disadvantages, and take their rightful place in the traders arsenal. Under certain trading conditions, DMA is absolutely a better choice. However, SB is to be preferred in other cases, and not only for the tax benefits, even if you have the funds needed to open an DMA account.

 

[gle101]

Correct I am not trading with them, I used to but its not through the want of asking to come back, so I cant real comment on the New Platform

if and when you able to trade with WS, please post your impressions on this thread.

 

[gle101]

Steve very well written and informative. Even though i have been in the industry for some years, each company has its own deep dark side. At the end of the day spread betting companies are corporations, that are supposed to make money...

Marvin, interesting statement. Yes probably all SB's have a "deep dark side" as you mentioned. If this "deep dark side" has to do with issues concerning client and platform performance, I think in the future it will be very hard to keep those secrets intact. The awareness and insight on how the industry is working, among traders is increasing day by day. The Internet and forums like this one contribute to raise this awareness, and if there is some grave irregularity's among the SB's, it will undoubtedly sooner or later be exposed in the public media. This, for better or worse, seeing it from the MM's point of view. It is my viewpoint that traders are now starting to demand to know the exact odds before making their stakes. This, in return, increases the standard of the services offered by the MM's, thus keeping only the best one in the market. I am quite sure that one of the industry's biggest challenges, will be how to cope with all the well informed and sophisticated traders that are drawn to investing in this financial sector.

I would be very much interested to know your viewpoint on this matter.

 

[gle101]

It will absolutely make no difference at all what broker you use. a losing trader will lose trading DMA or SB, and a winning trader will win ttrading with any broker that I have experience with (a lot).

Yes I agree, you are probably right on this assumption. However in some cases, getting that extra trading edge is a thin line to cross. DMA and its tools combined with a certain trading style, could, under some market conditions make the difference. I am sure that those of you who prefer the DMA business model, agree with this statement.

 

[c6ackp]

Yes I agree, you are probably right on this assumption. However in some cases, getting that extra trading edge is a thin line to cross. DMA and its tools combined with a certain trading style, could, under some market conditions make the difference. I am sure that those of you who prefer the DMA business model, agree with this statement.

Good to see some reality, at last, descending on this thread. Could be a new PR approach from WS. Very welcome - maybe gle got Marvin's old job or something?

 

[FXSCALPER2]

If gle doesn't work for WS, he certainly is a very peculiar individual.

Good to see some reality, at last, descending on this thread. Could be a new PR approach from WS. Very welcome - maybe gle got Marvin's old job or something?

 

[gle101]

Good to see some reality, at last, descending on this thread. Could be a new PR approach from WS. Very welcome - maybe gle got Marvin's old job or something?

I have not moved from Sweden, ha ha!

 

[gle101]

If gle doesn't work for WS, he certainly is a very peculiar individual.

I don't mind being a very peculiar figure.

 

[Phil Mibbutz]

Barclays Spreadbetting is yet another City Index offshoot, it seems.

 

[ns1000]

The rationale behind large instutions doing this is not to gain ground on the industry itself but to cross large CFD positions they have into spread bets. Purely for the purposes of tax advantage. From a pure spread betting point of view it will ruin this industry!

I suppose they are right to view SB as being similar to an option, large corporations may convert a winning CFD into a SB and leave the loosing trades as a CFD. Massive grey area, if you view it as you have the right to convert it into a spread bet but not an obligation...

I think this is unlikely Marvin. If you're saying that they are changing a prop CFD trade into a spreadbet, then there's unlikely to ae any advantage for a company. They're not subject to CGT anyway. Any profits they make would be taxed under corporation tax whether they made them from a SB or CFD. If you're suggesting that, for clients, they change a winning CFD to a Spreadbet, and leave the dogs as CFDs to create a CGT loss, then this is also highly unlikely; legally, any such switch would have to be carried out at the prevailing mkt price - any CGT liability from the CFD would be realised. An institution simply can't sell an option to avoid tax liability.

It's more likely that their asset managers may want the facility to offer spread bets as part of a tax efficient porttfolio. I could be wrong, but I really can't see them launching wholeheartedly into teh SB arena. It's simply not big enough. What they've got are cheap WL deals which give them another string to their bow.

 

[gle101]

Oh cheers Phil! You finally got it. No we cannot use client funds unless however you signed your money away by stating you are intermediary clients. In the most part SB clients are private clients and funds are always segregated. I must also admit we will pay INTEREST on funds of greater than £20k. Thats on un-encumbered funds, you will get 1% below our bank, that is i believe more than you will get at other SB's...

Marvin, when one signs the account agreement, doesn't one always sign up to be an intermediary client? At least, when you sign up with a CFDs broker, that is the case. As an intermediary client, you are, in fact, also signing away the possibility for "best execution". This is almost always the case when you sign up trading with a CFD's broker, isn't it the same with WS? I just wonder, as you are stating that intermediary clients accounts are not segregated. I must admit I haven't been looking at the account agreement that closely. Information about this matter would be appreciated.

 

[MarvinS]

Marvin, when one signs the account agreement, doesn't one always sign up to be an intermediary client? At least, when you sign up with a CFDs broker, that is the case. As an intermediary client, you are, in fact, also signing away the possibility for "best execution". This is almost always the case when you sign up trading with a CFD's broker, isn't it the same with WS? I just wonder, as you are stating that intermediary clients accounts are not segregated. I must admit I haven't been looking at the account agreement that closely. Information about this matter would be appreciated.

Gle, i am not 100% qualified to answer this but i assumed that all SB clients are private clients which means your funds cannot be used for the purposes of hedging. CFD brokers on the other hand ask you to declare that you are an experienced trader and ask you to sign a decleration that you are an intermediary client. Intermediary accounts are non segregated. WS accounts are private and therefore your funds are segregated.

 

[MarvinS]

I think this is unlikely Marvin. If you're saying that they are changing a prop CFD trade into a spreadbet, then there's unlikely to ae any advantage for a company. They're not subject to CGT anyway. Any profits they make would be taxed under corporation tax whether they made them from a SB or CFD. If you're suggesting that, for clients, they change a winning CFD to a Spreadbet, and leave the dogs as CFDs to create a CGT loss, then this is also highly unlikely; legally, any such switch would have to be carried out at the prevailing mkt price - any CGT liability from the CFD would be realised. An institution simply can't sell an option to avoid tax liability.

It's more likely that their asset managers may want the facility to offer spread bets as part of a tax efficient porttfolio. I could be wrong, but I really can't see them launching wholeheartedly into teh SB arena. It's simply not big enough. What they've got are cheap WL deals which give them another string to their bow.

NS1000 - I would not say this is a cheap WL deal, in fact Barclays have over 40,000 accounts of which they say alot are spread betting. This deal has probably been in the pipeline with City Index for a while. City is an extremely well managed company with obvious connections in the city. There must be some ric here for Barclays to be going in this direction! This is quite a big headline and for me it will alert the tax man...

 

[MarvinS]

Many salient points, but why cannot a spreadbetting company "hedge" against a successful client on the Dow or GBP/USD?

Surely it is easy for them to identify their very small minority of successful clients. If punter A goes long on the GBP/USD, all the spreadbetting company needs to do is to go long on the same market using DMA. They are certainly not short of funds to trade all markets.

As for travel agents........they are not too far above estate agents in the pecking order of reprobates

Point taken Pippppin - but the only problem is there could be 5000 punterA's at anyone time going long and short. Why would a spread betting firm go DMA long 1 lot of GBP then go short the next minute? Then go long then go short then go long then go short! Do you get my point. Spread betting firms try to be as naturally hedged by their clients as possible. Reason being it reduces their hedging costs, why charge a client spread then pay comms yourself.

 

[gle101]

Gle, i am not 100% qualified to answer this but i assumed that all SB clients are private clients which means your funds cannot be used for the purposes of hedging. CFD brokers on the other hand ask you to declare that you are an experienced trader and ask you to sign a decleration that you are an intermediary client. Intermediary accounts are non segregated. WS accounts are private and therefore your funds are segregated.

Thanks for the reply Marvin,
Yes I understand your point here. As I understand what you are saying, if one doesn't declare otherwise while signing the Worldspreads account agreement, one automatically becomes a private client, and thus has a segregated account? Sorry, about asking confirmation again, but it is a rather an important question.

 

[gle101]

NS1000 - I would not say this is a cheap WL deal, in fact Barclays have over 40,000 accounts of which they say alot are spread betting. This deal has probably been in the pipeline with City Index for a while. City is an extremely well managed company with obvious connections in the city. There must be some ric here for Barclays to be going in this direction! This is quite a big headline and for me it will alert the tax man...

Can one possibly ask how many accounts Worldspreads have? Oops, maybe that is a well kept secret?

 

[ns1000]

NS1000 - I would not say this is a cheap WL deal, in fact Barclays have over 40,000 accounts of which they say alot are spread betting. This deal has probably been in the pipeline with City Index for a while. City is an extremely well managed company with obvious connections in the city. There must be some ric here for Barclays to be going in this direction! This is quite a big headline and for me it will alert the tax man...

Sorry to labour the point, but I'm not sure exactly what you're worried it will alert the taxman to. Barclays can't use it to evade tax - opening a SB at a non-market price could be construed as tax evasion, and the tax treatment of spreadbets was covered in the gambling review a couple of years back.

Nick