I trade the indices mostly and was just wondering whether clients who trade £50-£100/ point using capital spread get tighter spread than lower risk per point or not?
A: We treat all clients the same whether 1 pound or 200 pound. The margins that we require are the same but for some of our really big clients we do ask for extra margin against positions as the low margin requirement on Capital Spreads is not really equitable (from a CS risk reward point of view) when clients are trading in the equivalent of 300 contracts on the exchange.
I can tell you from experience that when you get bigger with CS you don't get lower spreads - you actually get higher spreads because they purposely slip you a pip here and there to make sure they can get their hedge on. As far as stops go there is no difference apart from they will also slip your stop position too. And yes, I speak from experience.
A: Because binaries are a very hands on market we do not offer them in the demo (sorry). You can still open an account for free and look at our binary markets to see what you think.
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A: To start with the December price includes the effect of interest and dividends. The rolling price is again derived from the Futures price, but because it's adjusted for the above, it will be much nearer (but not the same as) the actual index during market hours.
As your question is about the Capital Spreads Demo I feel that we may be able to answer it if you call us during market hours 07.00 - 21.15.
The problem may be as boring as that we have not got the right price on the demo (although we are quite good at this these days) because, much as the demo is a useful tool, it does naturally come below the importance of the main live system. The prices on the demo are live but the charts are 15 mins delayed.
The demo is really there so that clients can get to grips with the trading platform, the terminology, what stops mean, how the order books work... etc without making expensive mistakes. Although some clients do use it for 'paper trading' I am a great believer that trading experience is only gained when it means something. Demo account trading is never painful; you never have to make a hard decision or really, seriously, question your actions or intentions.
I realize that big institutions make huge back testing procedures (i.e paper trading on historical data) on their new programs. But in these instances it is just computers making the decisions not 'fallible' human beings. If anyone has a 'new' trading system I would recommend rigorous back testing with none of that "oh well of course I wouldn't have traded then" or "I ignored that trade signal because ...etc.
A: Yes, we do offer quarterlies on all of our equity markets... these are not available in the demo/simulator platform.
The forward value of a quarterly is as you say calculated with the cost of carry (libor) plus any dividend adjustments. Libor is adjusted to reflect higher rates (for buyers) and lower rates (for sellers). The rolling charges on Capital Spreads are plus or minus 2% (not 3% which, I believe, is what the other company mentioned charge).
Quarterly prices are wider than rolling (obviously) and there is a point at which rolling becomes more expensive than quarterly trading. This is different for different products depending on the spread charged but in FTSE 100 shares is something like 2/3 weeks (of course for those of you who are short and who like to see the income rolling in every day it can often be more of a psychological thing rather than a value one !).
A: Unfortunately the answer, currently, is no. In actual fact (unless we are putting an upgrade through) the platform is very robust overnight with very little down time.
We will be moving to a 24 hour manned desk but this is some way in the future. However, having said that if the system is down any stop loss levels will still be honored on re-opening.
A: I can answer that ... the answer is no. 1 pip prices are narrower than the exchanges in most cases. We would just be rejecting half the trades we got as soon as the majority of clients realized that 'free money' was on the table and we would ruin our hard earned reputation.
No matter how fast a spread betting system is, they all work on the premise of taking an exchange price into a pricing engine adjusting it and then pushing it out onto the trading platform. This means that there is always a tiny (in some cases very tiny) delay in price movements on the exchange versus the SB platform. At 2, 3 ,4 pips (depending on the market) we can absorb this but at 1 pip we would just lose money to everyone with a direct access system who was not greedy and just took pip after pip after pip. As I understand was happening with our friends. Although I may be wrong.
People may say that the FTSE is 1/2 pip wide on the exchange but in reality it spends most of the time 1 and 1 1/2 pip wide. The Dow is more frequently 2 to 3 pips wide (in more than a couple of contracts) than not. Although the Euro is 1 pip wide sometimes more often it is not. And sterling oscillates between 1,2, and 3 pips. On top of this we have to include dealing costs...etc.
Also we have to be aware that we are not allowed to give the exact exchange prices to our clients for contractual reasons. At 1 pip wide we would effectively be giving this for free to clients which would open us up to problems with our price feed suppliers {from experience I can say this is a real headache with exchanges, exchanges ask for a lot of $$$ to be able to display their prices in real-time and you would have to reach separate agreements with the exchanges (FTSE, Nasdaq, CAC30...etc)}.
I know that many people will discount most of what I have said as just protective of our position but it all remains a fact.
Everything has to be done on a common benefit level, we offer (as do the other SB companies) a simple and generally cost effective route into the derivative/financial markets but at 1 pip wide where is our 'slice' of the action. Every trade would start at a loss for us (as hedging costs us money) and we would be in the position of hoping that clients lose virtually every time.
P.S. it depends what you mean by tight spreads. If you mean a tight price that you get 99% of the time as against claiming the 'lowest spread' that you get maybe 60% of the time ...which would you rather have?? As I have stated many times on this thread it is much better to have a few accounts opened (with various providers) so that you can benefit from the best prices at any one moment.
UPDATE: Capital Spreads are now offering 1 tick FTSE Rolling Daily spreads. 1 point spread on FTSE Rolling Daily. Hehehe. Now, the same for Dax, CAC and DJI Rolling Daily please...
Market forces or improved technology? Either way, I'm chuffed it's in place! 
Simon's comment on this development: The FTSE future trades on 0.5 pip wide and (compared to the Dax, Dow and currency markets) is reasonably stable. My dealers reckoned they could handle one pip on the FTSE so I have let them loose on it. (although, truth be told, we did not expect a 40 point gap on the open and a 90 point rally on the first day!!)
A: We have closed them down because we get about one trade every three days in the FTSE and none in the Dow and Dax whereas 99.9% of business is done on the rolling daily bets nowadays.
Because so little business was being done in the markets it was felt that the extra man hours required to ensure that they were in line with the rest of the market made them too onerous for any possible profitable return.
In reality they are completely fictional markets and rely too heavily on whatever the market makers do in the auction after hours. And we are fed up with complaints about a sudden shift in the settlement price at 16.36 six minutes after the market has closed.
Note that we have only closed the daily 'cash' market not the daily 'future' market.
.A: Maybe if you would like to look at equity pricing we may be able to redress the balance somewhat. Capital Spreads quote a spread of just 0.1% around FTSE 100 shares and 0.25% around FTSE 250 stock with no further commission or brokerage and on just 3 to 5% margin. Compare this to buying the real thing, 0.5% stamp duty (our gordon must have his slice!), brokerage on the deal (generally about £10 in AND out)... 100% of the money up front and then capital gains tax if you make a profit. On this calculation SB is far cheaper than the Direct Access that seems to be beloved of so many commentators.
Odd commodity markets are very difficult to price because many of them are 'open outcry' markets where the bid/offer last trade that you see on your screens is just information and not actually real prices. And the electronic 'out of hours' markets are typically very, very thin. The spread betting company must take this into account when pricing what are after all not the most popular markets on the board. Generally you will find that oil and rolling gold are much more realistically priced because they are much more liquid and now have a good electronic data feed from which to price.
A: All spread betting companies allow trading over the phone...but clients have to be slightly reasonable. If a company has an internet trading system and it goes down you would hardly expect that company to have dozens/possibly hundreds of people sitting around waiting to answer the phones on the off chance that the trading platform failed.
If you expected this of every trading platform/financial market in the world I can assure you that the costs of trading would increase massively as the exchanges / brokers / SB market makers...etc all over the world would pass this cost onto the clients.
So when problems occur (and after all this particular one was not of the SB companies making) clients must expect some delay in phone answering.
If an exchange goes down, for traders on that exchange that is the end of the story... NO TRADING...SB companies are not perfect (of course) but in the particular instance mentioned they performed far far better than the exchange...especially as the market was quite volatile at the time.
A: I feel I must comment here on some of the rather strange statements made.
To believe that we have time or the inclination to 'bias' our prices is frankly laughable we take trades all the time in thousands of markets and most positions/trades would not even register. To compare our 'live tradeable' prices with a company who only produce charts on which you cannot actually trade is ridiculous. Our prices come direct from the real market bank feeds exchange feeds etc. If we quoted 1 or 2 pips too high/low our big players who trade in 100's of pounds a point would come in and slaughter us.
The arguments over the FTSE prices will go on forever. YES the price is 'our price' because there is NO SUCH THING AS THE FTSE100 SPOT/CASH PRICE as you cannot actually trade in it. You can only trade in its 'derivative' which is the FTSE future. if you look at a chart for the FTSE 100 index on a tick by tick basis you will see that it only updates 4 times a minute whereas the Futures can change more times than that in a second. This means that the index will nearly always have a higher-low and a lower-high on the exchange charts than on a spread betting platform. BUT if you overlay 'Our Quote' chart on the cash market versus the exchange chart for the Futures market you will see that they will match price action for price action. Please remember that if our charts show a low at a price then ipso facto we were also offering the other side of the spread for a buyer. We have many instances of clients 'buying' below the exchange chart low and selling above the high.
In all this talk about biasing prices the main point appears to have been lost. Although we do not bias prices the reason that companies (not just SB's but market makers in general) do this is to tempt trades in the opposite direction to the risk on the book. If our clients are heavily long of something it is in our interest to raise our price above the market to a) tempt sellers thus reducing our market risk and b) dissuade further buying which would increase the book risk. As stated we do not do this, but 'in general' bias should benefit the majority of position holders at that particular moment in time. (of course for those with a short position in the above example it would add insult to injury!). Of course the perception amongst clients will always remain that biasing is only put in place to activate stops (which is why we make it company policy not to bias).
As always we trade in all good faith with our clients but occasionally problems occur. I can assure everyone that we currently do not have a single client set up for filtering. We are currently happy with the pricing model on our platform but that does not mean that this is a constant position of course (as we are a market maker NOT an exchange) deals will be rejected. On exchanges if you miss the price (as frequently happens...just ask an arcade or prop dealer) this is the equivalent of a spread betting company rejecting a price. Do direct access dealers then complain to the exchange? Of course not! They then try to trade at the next price etc...
A: No.... at Capital Spreads we have never closed / put to telephone only / deliberately delayed / changed your status or whatever. Actually, we do not do that much checking of client accounts. In the long run we know that some clients will win but more will lose. If we got any kind of name for closing down winning accounts this would be all over the Internet.
In the main the only serious checking that client accounts are subject to is money laundering / fraudulent card use etc...In fact to-date we have only ever closed an account for either reasons of fraud or being excessively rude to my staff.
We have thousands of accounts and as I have mentioned before about 21% are winners of one form or another, this is almost exactly the same as private clients on the futures (direct access) exchanges, (actually 21% is slightly better). This is probably because we force stops on all client positions and do not ring up trying to get further margin on losing bets...thus tempting them to throw good money after bad!
The fact is that if you were of a size that would become noticeable then we would be hedging you anyway as your trades would put our models over our risk parameters. Below this level all clients just form part of the whole book (winners and losers all together).
In reality the 'tricks' that spread betting companies are reputed to get up to are usually the exact opposite. It is the fact that SB companies do not let clients get up to 'tricks' that seems to grate. A client finds a little edge because of an incorrect price or a delayed feed or some such...the spread betting company cottons on to that client's activities and then 'bosh' he can no longer do it. For some reason 'ripping off' a spread betting company is considered to be fair but the SB company not letting the client do it is somehow unfair. I have worked in the industry for many years and have seen every trick in the book. 99.9% of them are attempted by clients not by the spread betting firms (who, after all, do have the FSA and the financial ombudsman looking over their shoulders).
A: We are a listed company trading under the ticker LCG (London Capital Group) quoted on AIM. London Capital Group has several units including FX and derivatives broking. Clients funds are held in a segregated account (at Barclays) and we must keep funds covering all client money AND all winning bets on a daily basis. We cannot even deduct losing bets from this sum. As clients are private, unless we stipulate otherwise, they are also protected by the FSA insurance which, I think, is up to £48K per person.
As with all things, recovery of money in disaster scenarios is like asking 'how long is a piece of string'. But we are a long long way from any such problems.
cheers
Simon
A: All I can really say is open an account and see how our platform compares. Do like for like trades at the same time and in the same amount and, at the end of say a 2 week period, see which platform performs the better. One of the major differences is the margin requirement on our platform and the ability to make trades of your required size rather than the exchange size.
We have a huge number of clients who and although (of course) some are unhappy for the vast majority the experience has been fair and above board.
A: Clients funds are 'ring fenced'. With top tiered banks. Not all in one bank either. They are doubly covered in that we must place funds to cover all open winning bets as well BUT cannot take away open losing bets.
As you are aware we never give credit and all positions have stops associated with them that are non negotiable (i.e clients cannot say "i will definitely have the money with you by close of business, please hold my position open") so a 'Nick Leeson' style event is not possible with us. We do not do CFDs either which are the only real weak point in the SB companies armoury as clients make much, much, bigger punts on individual stocks (often in second line stock) in these markets. But even here many CFD companies doubled margin requirements recently (up to 20% on ftse 100 stock) so they should be well covered.
The money held with Capital Spreads is as safe as it can possibly be, as we are as anxious to maintain security as well (not least with our own funds). We monitor the situation every day and, in reality, your money is probably safer with us than with your own bank as we will be quicker to move on any disquieting news whereas private individuals may not be privy to all the events as they happen.
