Kong Returns with CityIndex...

Corporate History

CityIndex has been around for nearly 25 years (established in 1983) and offers a good range of spread betting opportunities across a large number of markets. The ultimate parent company of City Index is IPGL, a private holding company. IPGL's other interests include an indirect shareholding of approximately 20 per cent. in ICAP plc, the FTSE 100 listed interdealer broker with a market capitalisation of approximately £4.3 billion, of which Michael Spencer is a director and Chief Executive Officer.

In September 2006, City Index acquired IFX Group plc ('IFX'), the London-based international business which provides institutional and retail clients with a range of innovative leveraged financial products, principally in the foreign exchange and global equity markets. The offer valued IFX at approximately £57.9 million. Today the Group trades primarily under the City Index, Finspreads, IFX and FX Solutions brands and also provides a fully outsourced white label solution to numerous partners.

As a group, City Index transacts in excess of 1.5 million trades per month for individuals in over 50 countries worldwide, across a wide range of instruments including contracts for differences, foreign exchange, options and, in the UK, spread betting services. The Group employs over 300 staff across 6 offices in the UK, United States, China, Singapore and Australia and has partnership relationships throughout Europe, North America, Australia and the Middle East. The Group is regulated in Europe, the United States, Singapore and Australia.

2008 was a rough patch for CityIndex having incurred a £61.1m loss in the year to March 2009 (in the previous year the loss amounted to £30m) as the spread betting provider wrote off bad-debts and goodwill on acquisitions amidst the credit crunch. CityIndex was forced to write off £35m in 2009 after clients defaulted on trades; which represented a small decrease on the £43m of write-offs in 2008. Most of the bad debt losses originated from just a handful of clients and CityIndex is now said to be profitable after a re-organisation of the business by Martin Belsham, who now heads City Index as CEO.

Michael Spencer

Michael Spencer, now 55 is an Oxford physics major who became a stockbroker at Simon and Coates in 1976. He is an immensely powerful and popular figure in the Square Mile, admired for having been a trader himself and and for working his way up to the very top. Today Michael heads ICAP, the world's largest interdealer broker. Through his Intercapital Private Group, he also heads investment bank Numis and spread-better City Index. Currently holds Tory purse strings as the conservative party's treasurer and spends most of his time moving between high finance, politics and charity work. Michael separated from his wife in 2008 although it is thought that this didn't act as a catalyst to his recent shareholding disposals whether the January disposal of Icap shares or of his stake in Numis, the financial services firm, in 2009. It is interesting to note that Michael Spencer was born in Malaysia but has still managed to turn himself into one of the UK's richest men.

General Points (we will strive to keep this review up-to-date)

1. Access to more than 12,000 UK, European, US and Asian shares.
2. Credit Betting has been discontinued and only Deposit Accounts are now accepted. There is also a telephone dealing desk for those who want it.
3. A trading simulator allows users to get the hand of spread bets without risking real money. This is decent enough to get used to their platform but remember it's nothing like spread betting using real money.
4. Newsflow and research are available (powered by Interactive Data). These include heatmaps which show a visual presentation of the market with the shares colour coded to indicate the top risers and fallers, support of watchlists, market reports, economic updates, press tips and broker upgrades.
5. Charting includes some of the 42 of the more popular technical indicators. The software includes the functionality to save a template and apply it to different assets.
7. City Index is unique in that it combines CFDs and spread betting on the same platform so both options are cross-margined and available at the same time which makes them easier to understand.
8. Rolling trades are automatically closed at the end of the trading day and may then be re-opened (crystallising any profit or loss for the day). You are not able to trade 'Rolling trades' without them closing and re-opening on a daily basis. You are however able to trade Futures which expire quarterly, and if left to expire will be closed at the mid-point and re-entered at the prevailing buy price (if you wish to roll them over).
9. Further, you may open multiple positions in the same underlying market at various times and subsequently varying prices. However you cannot go long and short in the same market. You may wish to hedge your position by placing a long in the futures and a short in the rolling as an alternative.
10. Stop and limit orders can be stipulated to be triggered either in terms of the spread betting quote or the underlying market.
11. Some years ago IFX has been bought by City Index Ltd and they have started streamlining certain back office and middle office divisions.
12. Debit or credit transactions are accepted. Payments can be made via Switch, Delta, Mastercard and Visa (although there is a 1.5 per cent commission charge on the latter pair).
13. Small trades by telephone are still permitted. Minimum stake varies according to the market but in general is £0.50.
14. Available companies on offer to trade need to have a minimum market cap of £200 Million. A USA stock requires a market capitalisation of USD1b for CityIndex to trade it.
15. Mobile dealing services are freely provided. Note that the cost of getting a getting a data subscription can be expensive on some networks - but T-mobile, for example, offers unlimited data downloads for £7.50 a month.
16. Free seminars are available throughout the year. Attend one and you'll get a free £25 per point vodafone bet. The seminars are presented by Tom Hougaard, a trading expert and familiar face on Bloomberg TV. His market timing predictions are famous and often he speaks about the psychology required to be a good spread bettor. Both beginners and advanced spread bettors are likely to learn something useful from these sessions, which are free to City Index clients.

Comparing some Popular Market Spreads at CityIndex

Market	Spreads
UK Top 100 Shares:	0.1 - 0.15% either side
UK FTSE 350:	0.3-0.4%
FTSE 100:	2 points
Wall Street:	4 points
EUR/USD:	3 points
£/USD:	4 points

Platform Trading Guide

CityIndex Trading Platform Guide (3930 Kb) is available here.

Good Points

1. Revamped trading platform is very simple and easy-to-use. Minimum stake is now just £0.50.
2. City Index sends out a good start pack with full info on all their products (available to request from our Free Brochures section).
3. Demo platform with £2,500 in virtual cash is available for a 2-week trial. For the initial 4 weeks you can also spread bet at just 25 pence per point.
4. Very wide choice of markets, though better commodity range found elsewhere. Access to new markets including Australian stocks plus wider coverage of Asian markets with more stocks recently added.
5. Offers spreads on the iShares market (margin is 10%). Spreads are also available on the China, Japan, Korea and Taiwan markets.
6. A wide range of order types including stops, linked contingent orders and Guaranteed Stop Loss tools are available and allow sophisticated risk management. Advanced tools for trade closure and auto-rollover offer trading flexibility.
7. City Index are one of the cheapest for controlled risk trades, with the premium for a guaranteed stop of just 1 pip. Also, guaranteed stops can be set when you open your position or at a later date for better flexibility although these are not available on all markets (GSL are limited to FTSE 100 stocks and indices).
8. CityIndex sends you a daily statement that I rarely look at however they also send you a monthly statement that summarizes all the various interests - much easier than doing it daily.
9. City Index have an execution policy which claims bar a few exceptions, everything below 'their size*' (usually up to £20 per pt = 2000 shares) goes straight through at the price you see on the screen. This provides execution certainty for all deals up to this size unlike DMA platforms. Also, you are not limited by the order flow as on a DMA platform. If there are only 10 shares available at the price you want on a DMA platform you can only buy 10 shares. On a synthetic model like City Index you could go long so as to control 100,000 shares and because it's a quote-driven platform you can sell the 100,000 holdings immediately (unlike having to wait until there are enough people wanting to buy the shares to get out).
10. Moreover the upgraded CityIndex platform includes streaming tradeable prices, enhanced research and 'firm quotes' meaning that the price you see on the screen is the price at which their trades will be executed.
11. Overnight financing charges on long positions now only apply to the proportion of your position not supported by margin which reduces trading costs. Previously overnight financing was charged on the full value of open positions. As an example, if you hold a long equity position that is supported by a margin of 20 per cent, overnight financing will be reduced by this amount, so a £20,000 position will now require about £280 less per year in financing. There is no change in the way that financing is paid on short positions.
12. Interest: City Index offers Libor minus 1 per cent over £50k.
13. City is an extremely well managed company with obvious connections in the city; this is so that an increasing number of stockbrokers are signing up to use it as the basis of their own client CFD/spread betting service. Offshoots include Barclays Spreadbetting, Hargreaves Lansdown Spread Betting and TD Waterhouse.

Bad Points

1. No trading in Small Cap Stocks (UK stocks must have a market capitalization of £50 million or more).
2. Spreads are very competitive for trading FTSE 100 shares but they are not the best for FTSE 350 stocks.
3. Reports of occasional downtimes - 'telephone trades only right now'. Connection time-outs still appear to be a problem.
4. Offer no limited risk accounts so customers can end up owing them money. CityIndex says this does not increase trading risks as they have a margin close-out feature which automatically limits (closes out) trades when losses hit a certain level in relation to a trader's margin but still...
5. Like IG Index, CityIndex closes and opens Daily Rolling Bets every day so profits/losses will be added or taken away from your actual cash balance at the end of the trading day even if you let the position roll over. I consider this a disadvantage since it can create confusion as the entry level is changing every day. Some other providers will not close rolling bets on a daily basis but will leave them open until the position is closed manually, in my opinion this is preferable as it is more transparent and you can see the physical finance posting every day.
6. City Index have a 2 point rolling cash FTSE spread, offer OCO and If Done orders, and endeavour to always be 1 point either side of the underlying cash price from 0800 onwards (according to their salesman). They also deal in .10 point increments. However, if you want to close the trade at 1630, you have to call them or close it online. Otherwise it is rolled over. This is the only aspect they seem to be lacking in, in terms of functionality. If you have a job, you don't want the hassle of having to phone them every day telling them not to roll a bet over.
7. Customer Support is not the best - it is useless to have live chat support if there is no person on the other end to take your call.

Verdict: City Index have recently revamped their platform and although the limited risk accounts are now no longer available, their offering has now improved.

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