Hi Conor,
Thanks for dropping in again to answer some of the questions. Needless to say that there seems to be a few points which a few clients wish to debate. If I could add one or two points of my own…
You mention that there are people who are only interested trading on zero spreads if they have ‘an edge’. You define your interpretation of what that edge constitutes and imply that it is occasions when WS’s price is slightly slow in updating.
I would argue that letting any client trade on a zero spread is handing the client ‘value’ because the client will always be trading at a price no worse than the market and sometimes trading at a price which is better than the market. Obviously with a zero spread your price can only reflect the ‘bid’ or the ‘ask’ at any given time – if your quote happens to be representative of the bid (in the underlying) then any client who buys from WS is buying at a price not available anywhere else and as such you’re giving away at least half a pip by allowing a client to open a trade. If the same method is used to close a trade then you’re giving away at least half a pip (on average) again and thus you’ve given away one whole pip in value on a complete trade. Obviously a client cannot trade purely using that method but that methodology can be used and applied to another trading method to squeeze a bit more from it.
In terms of clients who are trying to pinch ‘a tick here and a tick there’… surely their trading patterns identify them? Trades lasting five seconds? Hundreds of trades per day? Personally I feel that I was put on ‘dealer referral’ (DR) purely because I was profitable. I’m more than happy to discuss matters via this thread. When I was placed on DR I actually phoned the dealing desk and spoke to someone there. The dealer was polite and we had a good, open and informative chat about things. I did however get the impression that things are slightly different to the things that you have outlined in your post. For instance I established that my account wasn’t necessarily considered to be an account which was taking advantage of any slow prices. In fact my trading tends to take place when markets are slightly less volatile where ‘market noise’ is around four or five pips in size. Instead, dealing staff were concerned that some of my trades lasted only a minute or two. It was the length of time which some of the trades lasted which seemed to be the issue. If you look at my recent account history going back over the last month or so then you’ll see that I’ve still made several thousand pounds – all this money was made on DR. I still have trades which last only a few minutes although I also have plenty of trades which last considerably longer. Obviously your prices do not lag by a few minutes.
No question that DR does have an unfavourable impact on trading. If you went back over my trading record then you’d find that there are many occasions where trades are processed by your dealing staff at prices which do not reflect improvements in price which have occurred during the time which lapses during the DR process. Needless to say, normally a tick or more against my position results in a “please try again” message despite the fact that this movement occurred well after my order was submitted! Clearly if I’m still making money despite being on DR then I’m not cheating you on slow prices but I remain on DR. I’m more than happy for you to look into this and report back.
One question which I would like answered is the following; Why is it necessary to have two checks regarding price? First check is made by your computer system a second or so after I have clicked the buy or sell button and checks to make sure that the price hasn’t moved during the order submission process. A second check is then made by dealing staff – surely, if acting fairly, the dealing staff are just double checking what the computer has already checked?
Finally, out of interest, what is wrong with the suggestion which I posted earlier in the thread; if someone places a trade which goes for DR then why not just automatically fill it at a better price if the price has moved favourably for the client during the DR process? The dealing staff would still be able to monitor what certain clients were doing and indeed process those clients manually but clients would be safe in the knowledge that any positive price movement which occurred during the DR delay would be passed on. Obviously price movements which did not favour the client would result in trade refusals just like they do now.
Wishes,
Steve.
