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FSB: First and foremost I want to thank you for being patient with me and taking the time to do this interview for our Financial-Spread-Betting.com readers. How's everything on your end?
John: Good thank you. The market continues to throw up surprises and recent volatility has kept us busy after a relatively quiet period in March.
FSB: Tell us a little about Cantor Index. Who owns Cantor Index and how long have you been in business?
John: Cantor Index was established in the UK in 2000. We are part of the wider Cantor Fitzgerald Group who started over 60 years ago as a brokerage service for Wall Street's fixed income inter-dealer community. Through our online and telephone trading services, we give our clients access to spread betting facilities on a wide range of global markets. We aim to build long term relationships based upon expert support and customer service. We also aim to provide clients with free trading tools, to help them identify opportunities, allow them manage their portfolios effectively and execute their strategy.
FSB: Cantor Index has been relatively inactive in the past few years in particular on the marketing and product launches. Why the change in approach and why now?
John: In the last few years we have focused on building and maintaining relationships within our existing customer base, some of which we are very proud to say have been going strong for almost the entire ten years we have been in business. Activity has largely been around improving the efficiency of our trading platform and our account servicing. In a market that is hungry for headline offers and large cash joining incentives, this work may have gone a little unnoticed, but was essential to ensuring we could service our clients more effectively and efficiently. That said we have plans to re-launch our entire proposition this year, it's a very exciting time for us and something we have been working hard on for some time. I hope I can tell you more about this in the near future, but the re-launch will coincide with a sustained increase in marketing activity.
FSB: There has been something of an explosion in the popularity of spread betting in the United Kingdom over the last few years and now we are witnessing a bit of a spread war in the industry as providers fight for market share. Has the UK retail investor's speculative market reached saturation point?
John: An explosion is a great way to describe it. The simplicity and transparency of the spread betting product has really opened it up to short-term investing for the masses. Spread betting is helping people enter the market first time and gain access to new instruments all with relatively little capital outlay. Competition is always good for customers as providers try to enhance the attractiveness of their proposition. The recent reduction in spreads or the recent increase in the value of cash joining incentives wouldn't in my mind constitute a war, but simply a natural progression. Lots of smaller providers have entered the market or diversified from other related markets and they need a hook for potential clients. I do not think the UK market is at saturation point as the increase in entrants and subsequent marketing spend is actually growing and expanding the market into new areas. I think it is inevitable that competition and rising consumer expectations will drive a new evolution of spread betting that looks beyond price focusing on service, value for money and reliability.
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FSB: How different is the trading platform today from what it was when you launched? Is the software created and maintained in-house?
John: We have created this technology in-house and maintain it through a skilled team in the UK. Our platform uses the same technology as when we launched, it has however been updated and enhanced with market demands and we have added many new products to it. Feedback is that our clients like its intuitive nature and its reliability. These are both attributes we will look to take forward into our new platform later this year.
FSB: What types of accounts are offered at Cantor Index? Do you offer credit betting?
John: We offer two spread betting account types; Deposit Accounts and Guaranteed Stop Accounts. A Deposit Account requires that you have sufficient funds in your account to cover the total margin requirement of your open bets. These accounts also allow you to select whether you would like to attach a Stop Order or a Guaranteed Stop Order to your trades.
A Guaranteed Stop Account is essentially the same as a Deposit Account, the main difference being every bet you open will automatically have a Guaranteed Stop Order attached to it. This means the maximum amount you can potentially lose is fixed when you open the bet. If you meet all of our account opening criteria, we offer you a choice of which account you would like. Where applicants don't meet all of our experience criteria we can only offer a Guaranteed Stop Account, as it is more appropriate for less customers with less experienced.
We don't currently offer clients the ability to bet on credit. We have offered this in the past and may well do again in the future. At present it doesn't fit with our approach to risk or approach to helping clients manage their risk.
FSB: You offer CFDs, Forex and spread betting products. Are international clients able to choose between whether to open a CFD trading account or a spread betting one?
John: We are able to open accounts in a wide range of countries, including many of the current EU member states. We can't open all account types in every country, primarily due to regulations in specific countries. As regulation is subject to change we review applications on an individual basis, if an applicant passes our account requirements, and we can open accounts of that type in that country, clients can choose which account they would like to open. Something to consider is that whilst it does not stop us opening accounts for international clients, the tax-free capital gains on profits made from spread betting is only a benefit to residents of the UK and Ireland.
FSB: What is the procedure for opening an account? How much do I need? Is there a minimum/maximum deposit?
John: Applying for a spread betting account is easy. You can apply online at Cantor Index or simply call our sales team on 0207 894 8800.
There is no minimum deposit required to open a spread betting account, the minimum you would need to deposit would depend on the NTR factor of the product you wish to trade. We suggest starting with a minimum of £100-£200.
The minimum deposit required to open a margin FX account is £2,000 or equivalent in EUR/USD and £10,000 to open a CFD account – more information can be found at www.cantorfx.com or www.cantorcfds.com
FSB: Do you offer telephone dealing? [if so what is the minimum stake accepted on the telephone?]. Do you offer mobile phone trading?
John: We do offer telephone dealing for clients wishing to place bets of £5 per point or more. However, we always allow users to close positions with a smaller stake, if they are unable to access the platform. We don't currently offer mobile phone trading, but this is something we are working on for the future.
FSB: Could you walk us through Cantor Index's products? In particular what types of underlying investments, markets and events can I trade on? Do you offer trading on UK sectors (food & drug, construction, etc)? Also, can I trade different types of vehicle through a single account?
John: Our focus is on Financial Instruments. We offer clients access to spread bet on currency pairs, the major indices, commodities, equities, and interest rates. We are dedicated to offering value for money; with minimum bet sizes starting from £1 per point and some of the tightest spreads in the market (starting from 1 point).
Currently our CFD, spread bet, and Margin FX businesses work alongside each other through separate accounts. We will be bringing all three into one platform as part of our up and coming developments.
FSB: Do you offer daily rolling products like daily rolling indices...etc? If so what are the financing rates?
John: We do offer daily rolling bets on spot FX and shares which offer a significantly tighter spread as they are based on the underlying cash price of the instrument instead of the futures price. In terms of financing, the costs are factored into the spread when the position is rolled. For example, for a long position on a share, , you pay libor plus 2.5%. For short positions, we pay you libor minus 2.5% - this is automatically applied as the position is rolled.
FSB: What is your policy for rolling future bets (some providers will expire futures spread free or offer discounts on rolling futures)
John: We offer the facility to expire future bets free of charge and also give a discounted price for rolling the contract. For products other than single stocks, the saving is 50% of the spread. In the case of UK and US single stock futures, if the position is rolled, we remove all market spread which guarantees a level better than either the bid or offer of the current quote.
FSB: Are there any other fees which our readers need to be aware of besides the spread? Do you charge a quarterly trading account fee or an account inactivity fee or a fee for spread bets made over the phone…etc?
John: There are no additional fees – we aim to make our spread betting product as straightforward as possible. It's a very transparent way to trade as you always know exactly whether you are gaining or losing and don't have to take into account any other costs or expenses.
FSB: How do margins on CFDs compare to betting? (are margins identical for both products?).
John: Essentially the NTR or margin requirement of a product is the same whether you are spread betting or buying a CFD. How the actual value is calculated differs across the two products as CFDs deal with a price multiplied how many units you buy.
SB Margin requirement = Stake x stock price in pence x product NTR.
CFD Margin requirement = Number of shares x price in £ x product NTR.
FSB: In the last economic downturn we have seen spread betting providers upping margin requirements with little or no advance notice and curbing credit accounts. Cantor was one of the first providers to increase margins. Please comment. What is Cantor Index's present policy on margins and credit betting?
John: Yes, Cantor Index was one of the first providers to increase margins, some may say that we were too cautious, some may say that we were ahead of the game. With the events that followed, I'd say we were on the mark! We feel that it is important to protect our clients as well as protecting the company. Reducing margins and allowing clients greater and greater leverage isn't necessarily a good thing for either party. We want to give clients the ability to maximise their investment capital, but equally we don't want them to blow up, lose all their money and potentially end up getting into debt. This follows our approach of a responsible attitude to risk. We do not offer credit, ensuring clients do not bet with money they do not have and meaning we don't simply create a debtor problem. We respond to market volatility and margins are constantly under review. We have recently reduced our margin requirements on equities to as low as 10% on FTSE 100 stocks which we think is an appropriate level under the current market conditions.
FSB: Further to the above doesn't requiring a 75% margin remove one of the key advantages of spread betting/CFDs (i.e. trading on margin)? Is there a possibility that margins will again be increased in future and if so how much advance notice will clients get to cover the short-fall or wind down their positions?
John: As I mentioned we offer margins as low as 10%. Our margins are set on a product by product basis and are based on the liquidity and potential volatility of the instrument. You will find low margins and some higher margins we will never offer a universal margin requirement. Products having lower margins shouldn't necessarily be a key selling point. Clients need to understand that although the upside of trading with lower margins can provide greater returns, the downside means that they can more easily overstretch themselves and lose more than they invested. We frequently review our margin policy in line with the markets. There is therefore always the possibility that margins will again be increased in the future. We are trying to build long term relationships with our clients, and we know they trust us to be constantly monitoring our margins to ensure that we are giving sensible rates. Clients are always given sufficient notice when our margins change.
FSB: What are the order types that are available to be placed?
John: Currently, the platform allows you to place market, stop and limit orders.
FSB: Are there limits on how far a stop loss order can be placed from the entry price?
John: Yes, the maximum distance is linked to the available cash in your account. The minimum distance would depend on the volatility of the product you are trading. For example, the minimum distance for a stop on the Daily FTSE cash is nine ticks whereas oil is 19 ticks.
FSB: Do you allow clients to move stop loss orders when the markets are closed?
John: When the markets are closed we only allow clients to move stop loss orders further away.
FSB: What research, analysis and information services do you offer clients? Also, what provider do you use for your charting service (IT Finance, ProRealTime or is this created in-house?)
John: We offer a wealth of free trading tools to help clients research and find their next trading opportunity. We provide an extensive service through Digital Look. This includes Stock Screener to help you refine the type of companies you are looking for, Heat Maps to view entire markets or sectors at a glance, Top Market Movers, Fundamental Data, Broker Views, Performance tables, Scatter plots, Comparison Bar Charts and much more.
We offer dynamic charting also through Digital Look that allows you to view our prices in real time, annotate, add comparisons, change time scales and add indicators. We also provide free access to the Reuters Global, Financial Markets News Service.
FSB: Any other perks or account benefits which our readers should be aware of?
John: As outlined, most of our current account benefits are research and analysis based tools which we provide free to our clients. The main other benefit I would stress is we are always willing to discuss adding new products to our range. Just ask us and we will see what we can do to provide a solution for you.
FSB: Do you offer guaranteed stops? If so, on which markets and what is the charge for using them?
John: We do offer guaranteed stops on the majority of ourproducts. As is common across the industry there is a charge for applying a guaranteed stop which differs by product. This is included in the spread when you open the position, so you know exactly where you are in terms of profit or loss. You can find information on our guaranteed stops and the charges involved on our market information sheets.
FSB: Do you allow trading on FTSE 350 stocks? Smaller Caps?
John: Yes. As a rule we allow clients to trade on stocks with a market capitalisation greater than £50 million. However if you don't see the share you are looking to trade on our platform - just give us a call to find out if we can offer it over the phone. We often add new instruments at clients' request.
FSB: What markets are most popular with your clients?
John: Understandably the major indices and major currency pairs are most popular in terms of volume in comparison to single stocks and shares. We also see some good volumes in gold, silver, oil and UK 100 shares.
FSB: What is the average holding period?
John: It depends on what product is being traded, the current market volatility and market confidence; many clients will trade daily products and hold the position for a matter of minutes whilst at the other end of the spectrum clients can hold FTSE 250 shares for many months.
FSB: What types of client do you aim to attract?
John: We appeal to a diverse range of clients from absolute new entrants to very experienced traders. For example our tight FX spreads have over the last few years attracted specialist FX spread betting clients. In addition our expert trading desk attracts large stake telephone traders who like to be able to place bets over the phone, when they can't be at their PC. The range of trading tools we offer also attracts clients who like to research companies before they invest.
FSB: Please describe your typical client. How sophisticated do you need to be to get involved?
John: As financial spread betting is so easily accessible, the definition of a “typical client” no longer exists. Clients range from spread betting novices, with no previous exposure to the financial markets whatsoever to experienced professionals using spread betting as a way to hedge their existing portfolios quickly and easily.
You do not need to be an experienced investor to spread bet, however it is recommended that you do your homework; research the products you are interested in trading and be aware of the risks associated with spread betting.
FSB: Which typically is your busiest month of the year? Tell us of some of the busiest periods you have experienced over the years (could be elections…etc) you have been in business.
John: The markets are anything but predictable or typical. We can however say that December is understandably very quiet and that the summer months also tend to be quieter. So by default this makes the start and end of the year the busiest times for us. That said recent events like elections, natural disasters and their knock on effect, can create significant volatility, really busy trading periods and increased account opening. It will be interesting to see how the World Cup this summer affects volumes throughout the period and specific on match days.
FSB: What's your view on the future of spread betting in general?
John: The future of spread betting is exciting. The product is moving forward quickly and its flexibility verses the more traditional Shares, FX and CFD products should mean it continues to appeal and grow amongst investors. I expect to see the introduction of more and more product variations and its popularity as an alternative to traditional investing increase. The reputation of spread betting of being an inferior product for more advanced traders is slowly changing and I expect this to continue as people realise its potential for hedging purposes and as competition pushes improved quality of service, platforms and pricing.
FSB: Do you envisage that there will be major regulatory changes with regards to spread betting in the future?
John: I have touched on it previously, but I genuinely believe reducing margins and offering greater and greater leverage, sometimes irrespective of market volatility, should not be sold as an out and out account benefit. It will always be a feature of the derivative product market, but I imagine the regulators will encourage a more transparent approach to promoting true benefits over what is actually a multiplier of risk as much as it is an opportunity to maximise your investment capital.
FSB: What sort of stakes are your clients trading for? Where is the bulk of the action?
John: The majority of our clients trade small stakes £1 or £2 per point. This is a reflection of the retail market and spread betting itself but we do have some clients who trade many £1000's per point.
FSB: Do you see any differences in trading when the stakes are raised? How do experienced traders behave in such situations vis-a-vis speculative traders?
John: How would you distinguish between an experienced trader and a speculative trader? Are they not the same thing? All traders in the market are speculating…Even when the stakes are raised the end goal for all clients remains the same; to make x amount (their stake) per point movement on their trade. Those trading with higher stakes are likely to have the financial resources available to handle any potential downside.
FSB: What instruments might be better suited for beginners? Indices, equities, shares, forex?
John: I wouldn't say that one product over any other is better suited to beginners. I would suggest looking at something that interests them and that they can easily follow. If they only have time to look at the markets in the evening, it might be worth focusing on US stocks/indices, or something like FX which is traded 24 hours a day except on weekends.
FSB: Please describe some interesting strategies which your clients are using to spread bet the markets.
John: Most clients are just outright traders, some just trying to trade ranges, some trading on the back of momentum and others just long term holders of a particular product. Some clients will trade calendar spreads, some inter product spreads such as selling Brent oil and buying WTI crude oil. Some equity traders will hedge their portfolio in times of high volatility in the underlying indices market.
FSB: What differentiates you from other competitors?
John: We aim to provide a superior spread betting experience. At present this is firmly focused around customer service, efficient trade execution and our expert trading desk support. We will aim to focus more on technology and the instruments we provide this year – watch this space.
FSB: Do you hedge clients' positions (or 'net positions')? Or do you simply take a view of the market each day and adjust your quotes accordingly to balance your spread?
John: It totally depends of the size of the trade and our overall exposure in each individual product...
FSB: We've seen more companies move into this market and the structure of products change. What changes do you think there are going to be over the next few years? What challenges do you see ahead?
John: Undoubtedly, there will be more entrants into the market. Therefore I expect to see greater technology enhancements and a continuation of tighter spreads. There is however only so far this can go as after all the need to be able to place trades is basic. I then expect there to be a focus on customer service and client education. Everybody wants good service when they need it and aspirationally everyone wants to be the next Warren Buffet.
FSB: The growth of the spread betting and CFD markets are sometimes blamed for making traditional stock markets increasingly volatile. Do derivatives really amplify the share moves?
John: I don't believe they do. How different is buying and selling shares on a margin account to buying or selling a spread bet or CFD contract?
FSB: How safe are client funds? What is the situation regarding our funds deposited at Cantor? In particular are funds segregated from the company's own funds and where are client funds held?
John: Client funds are safe. As we are regulated by the Financial Services Authority we comply with all given security recommendations. Unless otherwise requested, clients' funds are held in a segregated account, separate from any of Cantor Index's funds.
FSB: Do you organize any training seminars or meetings which our readers could attend? Do you have any special sign-up trade offers for our readers who decide to go ahead and open an account at Cantor?
John: We do run periodical account joining offers so look out for those. In addition we have a constant £50 to refer a friend offer which is popular amongst our existing clients.
FSB: Have you any parting words for our readers?
John: We are working hard on improving our current offering and in the not too distant future we will offer even better value and technology for our clients underpinned by our approach to build good client relationships for the long term.
FSB: Thank you for your insight and time, Mr Horlock.
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