Zero Spread WorldSpreads

Visaria said:
I think WS are basing their zero spreads offer on the (accurate) premise that most traders lose money, and those that do lose, lose more due to picking the wrong direction rather than because of bid -offer spreads (and commissions).

So from WS's point of view, why not attract traders who do a small amount per point, using the zero spreads offer, and let them lose their money to us! Of course, anyone who makes money, they can be simply weeded out using the "Dealer Referral" scam.

The loss of the income from the spreads (which isn't much if the clients are only doing a couple of quid a point anyway) is more than offset by the increase in customers losing their money to WS.

Quite clever, actually.
Click to expand...

I think you're right, except for the bit about it being clever! If all those who can theoretically trade on zero spreads get put on dealer referral, the whole thing is just a scam.
 
Visaria said:
I think WS are basing their zero spreads offer on the (accurate) premise that most traders lose money, and those that do lose, lose more due to picking the wrong direction rather than because of bid -offer spreads (and commissions).

So from WS's point of view, why not attract traders who do a small amount per point, using the zero spreads offer, and let them lose their money to us! Of course, anyone who makes money, they can be simply weeded out using the "Dealer Referral" scam.

The loss of the income from the spreads (which isn't much if the clients are only doing a couple of quid a point anyway) is more than offset by the increase in customers losing their money to WS.

Quite clever, actually.
Click to expand...



To be honest the ‘Dealer Referral Scam’ has been around for donkey’s years in one form or another. Generally with this scam the client underestimates the advantage which they are handing to the broker / spreadbetting firm / cfd provider. This is especially true when it comes to shorter term trading.

What you say about ‘the average losing punter’ is correct; they simply get too much wrong too much of the time and as a result they lose money in a very straightforward manner without any hindrance from the firm. It’s the lesser percentage of punters which win which cause concern for the firm. This is especially true if the firm ‘bucket’ trades (ie doesn’t lay positions of in the underlying) – any client win is the firms loss.

In my experience you’ll often hear firms saying that they have a fairness policy / execution policy etc and quite often they’ll issue comments and statements saying that they don’t mind winning clients so long as the clients win fairly. I’ve never actually found these statements to be true when real money is concerned. When profit and loss comes into the equation the goalposts get quickly moved. Following this the firm normally come up with their stock accusation; clients are front running the firms price. Of course the firms are unable to come up with a fathomable explanation of how a simple home based trader is able to acquire and act on this ‘super fast’ data which they claim is several seconds quicker than premium data feeds which one imagines the firms spend hundreds of thousands on per annum?

The problem with the dealer referral scam is that it causes a knock on affect to other aspects of trading. In terms of World Spreads it is impossible to exit a position when the market is moving against you. You simply get stuck in a loop going round and round in circles. The difference between a winning trader and a losing trader is that a winner cuts losses quickly. This is not possible once WS places you on DR. Last week I tried to close a long trade in a falling market. In the end it took about four different attempts to try and close it. Each attempt was met with the same response after about 15 to 20 seconds.... “Price has moved – Please try again.” I’m sure that you can see the problem here? Each delay which the firm introduces increases the chance of order rejection as the firm are using an element of hindsight to judge whether to accept or reject the order. In a falling market the price is always going to drift away from the level of the original order. This means that you are trapped by the firm. You cannot exit the trade until the market stops falling.

In my opinion there is no point in having a zero spread broker if the broker scams back any benefit which the zero spread provides (and believe me a zero spread is a nice little advantage if the customer knows how to use it correctly).


Steve.
 
Last edited:
I found this interesting:

http://www.odlmarkets.com/NDD/website/

How do traditional spread betting firms make money?

Most spread betting firms act as a market maker and run a trading book against their clients. This means that when you open an FX position with them they will normally take the opposite side of your trade and your position is not traded in the market. If your position makes money, the broker will be out of pocket, if you lose money your broker will make a profit of the same amount as your loss. The business model relies upon clients suffering trading losses.

Alternatively, if you are a successful trader and make money on a regular basis the broker may manually hedge all of your orders in the market which means you must wait for a dealer to process and accept your order before your trade is confirmed. If the market moves in between the time it has taken the dealer to receive and process your order you may also receive a re-quote.

Example 1. Your spread betting firm is running a trading book against you: You go long of EUR/USD and the firm takes the opposite side of your position rather than hedging it. Let’s say your position has been successful and on closing the trade you are up £1,000, your broker will have lost the same amount of money. Do this too many times and your broker will start to manually hedge every single order you do which could mean re-quotes, execution delays and wider spreads. When spread betting firms run a book against their clients they will only make a profit if their clients lose money overall.

Example 2. Your spread betting firm’s dealing desk is manually hedging your positions: Your firm decides to manually hedge your orders in the market which means that every time you place a trade a dealer must accept the order or will provide you with a re-quote. You go long of EUR/USD with the view to making 100pts on the trade. On accepting your order, the dealer can wait a period of time before hedging your order in the hope of being able to hedge at a lower price. The same applies when you close your order, on accepting your trade, the dealer may wait a while to see if the hedging trade can be closed at a higher price. In both cases, the dealer can generate profit from your order by taking a view on the market. Of course, the dealer could make an incorrect decision and lose money on this type of order too. Generally, customers who have prices move in their favour quickly after getting filled are unprofitable for the spread betting firm and dealers may use re-quotes, execution delays or widened spreads to discourage such customers.

How does ODL Markets make money?

ODL Markets, powered by FXCM, uses its No Dealing Desk technology (or NDD for short). This gives you access to trade with many of the worlds largest liquidity providers which are all competing for your business. Using NDD means that ODL has no conflict of interest with its clients and therefore wants you to make money on your trading. ODL makes money in the form of the dealing spread, we take multiple rates from major financial institutions and add a standard mark-up to the spread. We do not make any money from your FX trading losses. Instead we take the best bid and best offer rates from the world’s largest liquidity providers and stream these prices through to your platform. When you place a trade, our NDD technology automatically routes your order through to the appropriate institution and the trade is executed.

What are the benefits of No Dealing Desk?

* No conflict of interest between broker and trader
* No trade re-quotes
* Place limit and stop orders within 1 pip of the market price
* No dealer intervention
* Pricing from over 10 banks all competing for your business
* Scalping and news trading welcome
* No maximum deal size
* Anonymous trade execution


How do I know if my current broker is trading against me?

Not all brokers operate as a market maker and some may have similar technology to our NDD system. We think the best approach to take is to call your broker and ask them if they are profiting from your FX trading losses. ODL Securities powered by FXCM only makes money from the spread which means we want you to be a successful and profitable trader…. let’s hope your current broker does the same.

My spread betting provider claims to offer No Dealing Desk, how can I tell if this is true?

A broker who offers No Dealing Desk will never manipulate your orders, give re-quotes or restrict certain trading strategies. The role of an NDD broker is purely as a middle man to your deals and in return makes a transactional based commission. There is no incentive for any NDD broker to restrict your trading in any way.

Why does my current broker give me re-quotes?

Most spread betting firms have staff working on dealing desks that monitor all orders that are made via their trading platform. Their job is to process your order internally and regardless of whether they are running a position against you or manually hedging your trade, delays can often be experienced especially during periods of market volatility or during important market news events. No Dealing Desk allows ODL to process all orders automatically from the point the customer places the trade on their platform all the way through to the trade being executed with the bank. We have removed the need for any manual interaction which means quicker execution and importantly no conflict of interest.

Why does it seem to take longer for limit/stop-loss orders to be filled when I am trying to exit a winning position?

When spread betting companies run a book against their clients, their business model relies upon clients losing money. This means that their dealers are watching all of the pending orders that clients have waiting to be executed at a specific price. If a customer’s position is moving close to their stop-loss, the dealing desk will be waiting and ready to fill the order as soon as it touches the stop-loss price. On the same token, if a customer is making a healthy profit and is near to a limit order, the dealing desk will be less inclined to fill the order as quickly because it represents a corresponding loss to dealing desk’s daily profits. ODL Markets, powered by FXCM does not have this conflict with its clients’ best interests. Using our NDD technology, your stop loss and limit orders are executed at the best bid/offer price made available by our many liquidity providers. We do not have a conflict of interest which means you can rest assured that we process your orders as quickly as possible, regardless of whether they are making money or losing.

Why does my current broker restrict me from certain trading strategies?

Our experience suggests that Dealing Desk firms prefer customers who use range trading strategies where the client is buying into falling markets and selling into rising markets. The reason that they like this type of client is because typically the time between their orders will be hours or even days giving the dealing desk enough time to process each order. Dealing desks tend to struggle with more aggressive trading strategies where clients are trading very tight ranges in order to make just a couple of pips on each trade, such strategies are often referred to as Scalping and many dealing desk spread betting firms will ask you to stop trading in this way, particularly if you are making a profit as a result.

Why does my spread betting provider insist on stop-loss/limit orders being a minimum distance from the market price?

Most spread betting firms do not permit you to place pending orders too close to the market price; usually they restrict you from doing so by up to 10 points. This is done because dealing desk spread betting firms need enough time to process your order. If you place an order with a stop-loss or limit order only a couple of points away from the market rate it will not give their dealers sufficient time to hedge your opening order and then trade out of it once the pending order is inevitably hit.

When I look at the chart it has traded through my stop-loss/limit order, why does this happen?

Trading during volatile and quick moving markets can make trading conditions difficult, particularly when trading during news events. When a currency takes a sudden move, often it will be accompanied by reduced liquidity in the market making it harder to fill your order. A traditional dealing desk broker will use this as an excuse to manipulate the price that your order is filled at, where as ODL will fill your order at the best available price at all times. Either way, reduced liquidity can cause disadvantages to both forms of execution, the only difference is that you will be treated impartially at ODL.
Click to expand...
 
Visaria said:
I found this interesting:

http://www.odlmarkets.com/NDD/website/
Click to expand...

All well and good, but ......
Tell me, what are ODL's spreads 5 seconds before Non Farm Payroll ? Or at five to ten on a Friday before a US holiday ? Or how do their spreads compare generally? How much leeway do they give clients in trying to keep them in positions rather than stopping them out straight away ? What financing rates do ODL actually charge on open positions compared to the real market ?

A company who is regulated by the FSA is bound by its rules and regulations and those of MiFID. As such it cannot manipulate prices to their or anyone else's advantage.

All modern online trading companies have state of the art price feeds coming in from top tier banks.

Are you saying that a client is guaranteed to be able to deal on the price they see on the platform ? OR will they be filled at a different price with slippage or not at all ?

We can all twist things around to make them sound better or worse than others. What stands the test of time is one's reputation. How's that going since the merger?

On the subject of zero spreads, I was actulaly taught many years ago as a young dealer that it was very rude to make someone a choice price (zero spread). This is beacuse what you are actually saying is that I don't care what you do, I will make money out of you because I am that good and you are not !
 
Smart Live Markets said:
All well and good, but ......
Tell me, what are ODL's spreads 5 seconds before Non Farm Payroll ? Or at five to ten on a Friday before a US holiday ? Or how do their spreads compare generally? How much leeway do they give clients in trying to keep them in positions rather than stopping them out straight away ? What financing rates do ODL actually charge on open positions compared to the real market ?

A company who is regulated by the FSA is bound by its rules and regulations and those of MiFID. As such it cannot manipulate prices to their or anyone else's advantage.

All modern online trading companies have state of the art price feeds coming in from top tier banks.

Are you saying that a client is guaranteed to be able to deal on the price they see on the platform ? OR will they be filled at a different price with slippage or not at all ?

We can all twist things around to make them sound better or worse than others. What stands the test of time is one's reputation. How's that going since the merger?

On the subject of zero spreads, I was actulaly taught many years ago as a young dealer that it was very rude to make someone a choice price (zero spread). This is beacuse what you are actually saying is that I don't care what you do, I will make money out of you because I am that good and you are not !
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I don't trade with ODL, so I have no idea about their spreads 5 secs before NFP! (I would expect them to widen with the rest of the market, tbh). Btw, I'm not insane enough to day trade 5 secs before the announcement! I would stop all trading by 13:15 at the latest and not resume anything till maybe 13.40. This doesn't apply to longer term trades which is what i mainly do anyway.

I'm not promoting ODL, I was just posting their take on how the SB industry operates. Actually, I've seen that it has already been posted elsewhere on this forum, so apologies for reposting.

Back on topic, if you don't want to trade zero spreads because you are suspicious of their motives, then don't . Simple. If you want to do some sort of arbitrage or work on tick charts, that's fine as long as you realise they don't like it and if they find out, they will put you on their dealer referral system (scam).
 
Smart Live Markets,

You make some good points. I read the ODL piece and thought pretty much the same as you. The way I see it pretty much every firm has their own ‘angle’ on spreads / execution / margin requirements / slippage / speed of service etc that they simply advertise what they feel are their strengths. I personally liked ODL prior to them going over to FXCM – their level of service was good and their ‘in hours’ spreads were as tight as anyone else around and they had a very fair slippage policy during data releases. I personally didn’t like the way I was ‘hearded’ onto the new FXCM system so I left.

I’m guessing that FXCM charge a larger spread than most so they can afford to fill clients at screen prices 95% of the time – a simple case of swings and round-a-bouts.

I wouldn’t say that offering ‘zero spreads’ is rude! In fact it’s quite a nice idea (from a client perspective). It was the firm’s idea to offer this service – the clients didn’t force them to do it. They obviously have their own reasons for rolling out this service – no doubt that they would hope to make a profit from it. The only way that they can guarantee a profit is to root out short time frame traders who make money. Four or five pips here and there at £10 or £20 per pip soon add up. £200 profit per day is over £50k per year and this isn’t even compounded. A few clients like that on your books (assuming that you are running one of the smaller firms) and you’re already looking at a serious dent in your bottom line. It’s not the trader’s strategy which causes you to react, it’s the pure financial cost.

Any plans for Smart Live to start offering ‘zero spreads’? Maybe on GBPUSD? I promise I won’t call you rude!


Steve.
 
stevespray said:
Smart Live Markets,

You make some good points. I read the ODL piece and thought pretty much the same as you. The way I see it pretty much every firm has their own ‘angle’ on spreads / execution / margin requirements / slippage / speed of service etc that they simply advertise what they feel are their strengths. I personally liked ODL prior to them going over to FXCM – their level of service was good and their ‘in hours’ spreads were as tight as anyone else around and they had a very fair slippage policy during data releases. I personally didn’t like the way I was ‘hearded’ onto the new FXCM system so I left.

I’m guessing that FXCM charge a larger spread than most so they can afford to fill clients at screen prices 95% of the time – a simple case of swings and round-a-bouts.

I wouldn’t say that offering ‘zero spreads’ is rude! In fact it’s quite a nice idea (from a client perspective). It was the firm’s idea to offer this service – the clients didn’t force them to do it. They obviously have their own reasons for rolling out this service – no doubt that they would hope to make a profit from it. The only way that they can guarantee a profit is to root out short time frame traders who make money. Four or five pips here and there at £10 or £20 per pip soon add up. £200 profit per day is over £50k per year and this isn’t even compounded. A few clients like that on your books (assuming that you are running one of the smaller firms) and you’re already looking at a serious dent in your bottom line. It’s not the trader’s strategy which causes you to react, it’s the pure financial cost.

Any plans for Smart Live to start offering ‘zero spreads’? Maybe on GBPUSD? I promise I won’t call you rude!


Steve.
Click to expand...

Haha Hi Steve
No plans for zero spreads on anything to be honest. I helped set up the spread betting desk at ODL a few years ago. We ran a zero FTSE spread for the day on St Georges day and it cost us a small fortune, because as you say all these small trades add up.

I think that is why WS have made it for min account size of £5k to limit the number of people who are elligable, but they can still advertise like mad.

Regards
SLM
 
stevespray said:
Smart Live Markets,

You make some good points. I read the ODL piece and thought pretty much the same as you. The way I see it pretty much every firm has their own ‘angle’ on spreads / execution / margin requirements / slippage / speed of service etc that they simply advertise what they feel are their strengths. I personally liked ODL prior to them going over to FXCM – their level of service was good and their ‘in hours’ spreads were as tight as anyone else around and they had a very fair slippage policy during data releases. I personally didn’t like the way I was ‘hearded’ onto the new FXCM system so I left.

I’m guessing that FXCM charge a larger spread than most so they can afford to fill clients at screen prices 95% of the time – a simple case of swings and round-a-bouts.

I wouldn’t say that offering ‘zero spreads’ is rude! In fact it’s quite a nice idea (from a client perspective). It was the firm’s idea to offer this service – the clients didn’t force them to do it. They obviously have their own reasons for rolling out this service – no doubt that they would hope to make a profit from it. The only way that they can guarantee a profit is to root out short time frame traders who make money. Four or five pips here and there at £10 or £20 per pip soon add up. £200 profit per day is over £50k per year and this isn’t even compounded. A few clients like that on your books (assuming that you are running one of the smaller firms) and you’re already looking at a serious dent in your bottom line. It’s not the trader’s strategy which causes you to react, it’s the pure financial cost.

Any plans for Smart Live to start offering ‘zero spreads’? Maybe on GBPUSD? I promise I won’t call you rude!


Steve.
Click to expand...
I do hope that SLM will not offer Zero spread, it is not sustainable in the long run. Someone has to pay for it, I cannot imagine that the interest rate will cover it all.
 
gle101 said:
I do hope that SLM will not offer Zero spread, it is not sustainable in the long run. Someone has to pay for it, I cannot imagine that the interest rate will cover it all.
Click to expand...

Quite right. Offering zero spread would be a disgrace. I think all SBs should go back to 8pt spreads and crashing platforms, like it was in the good old days.
 
lol @ any pro firm trading @ an SB.

I know you posted that tongue in cheek DJ but the idea that a SB company could handle our size is funny, it really is :D
 
DowJones said:




Oh, as an aside, I was shown some interesting software a while back which is apparently in use with some less-than-reputable forex brokers. Basically this software plugs-into a dealing platform and erodes your account over a period of time. The brokers can set a load of variables to alter the extent/frequency/type of activity that this software can use so that it's activity is not too obvious. Similar software can be used in other forms of on-line gambling. The software was actually frighteningly good.

NB: The above post is informational only. I am not accusing any specific company of acting in breach of any regulations, or indulging in unethical behaviour. I have never used WorldSpreads and so cannot comment on them.

DJ
Click to expand...

Can you explain more about this software? How exactly does it erode your acct over a period of time?
 
DowJones said:


I agree. In fact I spoke to WS once (quite some time ago) and they warned me out-right not to "scalp" (i.e. trade short-term). I then tried intra-day trading with another SB firm which started off fine...

DJ
Click to expand...

Can you define "scalp"? I thought scalping was basically trying to grab a point here and there. However, you're saying scalping is short term trading, basically day trading in this context. Well, I don't understand what the point of a rolling DAILY future is if not to encourage day trading.
 
Visaria said:
Can you explain more about this software? How exactly does it erode your acct over a period of time?
Click to expand...

Google 'Virtual Dealer Plugin' and have a look... I won't post directly in case it upsets any mods...
 
If anyone has any further updates using the "zeroes" it would be good to hear from you because if the zero’s are really what they are cracked up to be it in my opinion it makes day trading open to the masses, my logic is that if you just performed random trades with a stop loss / limit pre set at 10 pips above/below your trade then by simply tossing a coin on the direction of the trade probability sys that you will end up even over the long run.

Therefore if you performed 20 trades in a day, you only need to tip the balance in your favour by having 11 winners and 9 losers and you would have made 20 pips, if £20 per pip = £400 per day tax free, £2,000 per week, £8,000 per month etc.

Easy isn’t it??
 
hornet99 said:
If anyone has any further updates using the "zeroes" it would be good to hear from you because if the zero’s are really what they are cracked up to be it in my opinion it makes day trading open to the masses, my logic is that if you just performed random trades with a stop loss / limit pre set at 10 pips above/below your trade then by simply tossing a coin on the direction of the trade probability sys that you will end up even over the long run.

Therefore if you performed 20 trades in a day, you only need to tip the balance in your favour by having 11 winners and 9 losers and you would have made 20 pips, if £20 per pip = £400 per day tax free, £2,000 per week, £8,000 per month etc.

Easy isn’t it??
Click to expand...

No, because WS will probably stop you doing that after a couple of days.:(
 
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