 |
Financial-Spread-Betting: 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 readers. How's everything on your end?
David: Thanks for giving me the opportunity to address your readers. Business is going very well (I expect everyone says that) but since we started back in September 2004, we've been getting more and more interest in our service. The feedback is that people feel we've got the mix just about right - competitive spreads and margins; an effective and reliable Internet platform together with a first class phone service.
Financial-Spread-Betting: Before we get to your service, can you give us a quick run down on how you first got involved in this industry and for how long? Describe your role at MFGlobalSpreads. How long have you been with MF Global UK? Tell us a little about yourself.
David: I fell into it by accident. It was the mid '80's, and it wasn't necessary to plan one's City career from nursery school back then. I worked at IG Index from 1986 to 1995 - Stuart Wheeler hired me prior to "Big Bang" on the strict understanding that I would be a salesman, not a trader (the job I really wanted) - but he kindly relented after a few weeks. After that, I was a local on LIFFE trading FTSE futures and Eurolira, but the lure of spread betting was too strong. So I worked at City Index for a couple of years before helping to set up Financial Spreads in 1999. I now head the desk at MF Global Spreads - the spread betting division of MF Global UK.
Financial-Spread-Betting: How big is MF Global (formerly known as Man Financial)? How many clients do you have?
David: MF Global Spreads is a division of MF Global UK Limited - the brokerage operation of the MF Global (formerly Man Financial), with its origins going back over 200 years, is a leading global provider of alternative investment products and solutions as well as one of the world's largest futures brokers. The Group joined the FTSE 100 index on 24 September 2001 and currently has a market capitalization of £5 billion.
MF Global has offices in London, Chicago, New York, Paris, Hong Kong, Singapore, Sydney, Kansas City and Taipei. It is a significant presence on the world's major securities and futures exchanges, on many of which it is leader by volume, primarily as a result of its institutional client base.
Man financial is certainly profitable but I'm afraid I don't know how many clients we have.
Financial-Spread-Betting: Could you give us a brief overview of MFGlobalSpreads? When did MFGlobalSpreads opened its doors for business?
David: We started quietly in September 2004 for telephone trading and launched our online platform in January 2005.
We offer a comprehensive financial spread betting service covering stock indices, individual stocks in the UK, US and Europe, currencies, commodities, bonds and interest rates.
Financial-Spread-Betting: Tell us why you decided to plunge into the spread betting business?
David: MF Global has been interested in offering spread betting for a number of years as many of its customers had expressed an interest in such a service. The addition of a spread betting operation means that MF Global now offers a full range of alternative financial services.
Financial-Spread-Betting: What about the software that runs the site, how do you update the technology? What would you say really stands out about it? What is your relationship to London Capital Group?
David: We offer a browser-based platform so there is no software to download. Programmers with extensive financial spread betting experience built the system from scratch, and continue to add to it. The aim was to take all the best features of other spread betting sites and add our own unique improvements, while avoiding mistakes made in the past. I think we've done pretty well, but we never stand still. I think the ability to place any combination of contingent orders online together with "orders aware margining" stangs out. London Capital? From what I've heard we're quite different - we don't weight our service to the Internet; we don't insist that every bet is covered by a stop and we offer guaranteed stops.
Financial-Spread-Betting: What instruments are available to bet on at MFGlobalSpreads?
David: We offer a comprehensive financial spread betting service covering stock indices, individual stocks in the UK, US and Europe, currencies, commodities, bonds and interest rates.
Financial-Spread-Betting: How wide are the spreads? How do they compare to other spread betting firms?
David: If you look across all the products we cover I think we have some of the lowest spreads. We don't deal for free, but the price you see is the price you get.
Financial-Spread-Betting: Are clients limited to trading online or is phone dealing also available?
David:
While we're very proud of our online platform, phone dealing is vital to our business. We can only build relationships with our customers by talking to them and our dealers were all working in the spread betting business before the advent of online dealing.
Online dealing has brought down costs, narrowed spreads and added pricing transparency, and these advances are all now available over the phone.
Additionally, we don't place restrictions on bets placed over the phone.
 |
Financial-Spread-Betting: Are gains/winnings taxable?
David: All transactions are classed as bets. Under current UK legislation, winnings are not subject to taxation, while losses may not be offset against trading profits elsewhere.
Financial-Spread-Betting: Do you accept International clients (besides UK residents)? In which base currencies can clients trade?
David: Clients can trade in any currency they like. Our service is available to UK residents and Ex-Pats.
Financial-Spread-Betting: Do you accept deposits by BACS? Which other payment methods do you accept?
David: YES. We accept telegraphic transfers (BACS, CHAPS) and payment by debit cards. We don't accept cash, cheques or credit cards.
Financial-Spread-Betting: MF Global Spreads is paying interest on all cash balances. This is good! Could you please tell us more about the rates (what is the current interest rate?, do accounts need to have a minimum balance to be eligible?, does the rate fluctuate?, do accounts with a bigger balance attract a higher interest rate?...etc)
David: We pay interest on unencumbered funds for all balances (no minimum) at 3% under UK base. So with UK base rates at 4.5% our current rate is 1.5%, accrued daily and paid monthly. This is negotiable for larger balances and on accounts where there is greater trading activity.
Financial-Spread-Betting: Do you offer credit facilities? Can accounts be overdrawn?
David: We do offer credit. We request immediate settlement of debit balances and while we pay interest on positive cash balances, we also charge interest on negative ones.
Financial-Spread-Betting: What is the minimum deposit and minimum/maximum opening trade size (if there is any)?
David: We have a minimum deposit of £500. Our minimum and maximum trade sizes are negotiable.
Financial-Spread-Betting: Are there any inactivity fees? Any other fees/commissions that our readers should be aware of?
David: There are no inactivity fees or other charges.
Financial-Spread-Betting: I have been very much attracted to your statement of being able to open positions in companies with a market cap of just £10m. However, upon further investigation this requires a high Notional Trading Requirement; the margin requirement sometimes being 60% - 70% and in cases like this I would rather just hold the underlying stock. Please comment.
David: We can usually offer spread bets on UK companies with market caps as low as £6m ($10m). The NTRs are often large because these are typically illiquid stocks. Many people would still prefer to lodge 70% margin and have a tax-free bet than hold the underlying, and the standard NTR is usually halved if you bet on the "Daily Individual Share" (the spread is much narrower as well!).
Financial-Spread-Betting: Man Spread Trading supports multiple order types, including Stop Orders, Guaranteed Stops, Limits, Contingent Orders, and OCOs (One-Cancels-the-Other (OCO) Orders). Most of our readers are familiar with limit and guaranteed stops but Contingent Orders and OCOs are a recent welcome addition. Could you please explain those orders in more detail to our readers and how they can benefit by using them (if possible with examples)
David: OCO - My scenario (fictitious): I'm long £10 Dec FTSE at 5500. I think it will rally higher and will happily take a profit at 5650. However, if instead the FTSE trades lower and goes through support at 5430, then I think it could fall back to 5000.
So, I leave an OCO - Sell £10 Dec FTSE at 5650 limit OCO Sell £10 Dec FTSE at 5430 stop. If the limit is hit first, then the stop is cancelled and vice versa.
Contingent - My scenario (fictitious): Gold stands at $455. I think gold will rally up to $550 but I don't want to pay more than $450. However, if it subsequently breaks through support at $430 then I don't want to be long.
So, I leave a Contingent - Buy £10 Dec gold at $450 limit. If done, Sell £10 at $550 on limit, OCO sell £10 at $430.
Financial-Spread-Betting: When a trader goes long on equities via a spreadbet position he is effectively borrowing an amount equivalent to the cost of the shares. What are your financing charges?
David: Our standard financing for "Daily Individual Shares" is UK base rate, plus 2.5% for long positions. The credit for shorts is UK base minus 2.5%. These are negotiable.
Financial-Spread-Betting: Getting beyond the up-front process, how do your people actually execute? Do you have principles of execution?
David: We are "principal" in any transaction - our customers are "buying from" or "selling to" MF Global Spreads.
Our principle is to deal with integrity with all our customers. We are happy to make our money from the spreads we charge, and we don't try and squeeze anything else from the trade. We don't go looking for stops or trigger them aggressively, and we've been around long enough to know that building up trust is all-important.
Financial-Spread-Betting: Do you trade yourself? Have you made any mistakes along the way that you have learned from? If so, would you describe them?
David: I do trade myself and I've made every mistake that it's possible to make (and they've all cost me money). There really isn't enough space for all of them. I was typing, "please don't ask me this - it's too painful" and remembered the key: don't hide the mistakes away - go back and learn from them.
Financial-Spread-Betting: What skills and personal characteristics does one have to acquire to succeed at spread betting?
David: Patience and humility - don't rush in and be big enough to admit to yourself when you're wrong. Don't take it personally - the market will do what the market will do.
Financial-Spread-Betting: What is your tip to anyone wanting to start spread betting?
David: Don't spread bet with money you cannot afford to lose and do your homework. If you are trading through desperation or by hope and a prayer, then the odds will be stacked against you.
Financial-Spread-Betting: As of now, what trends do you see in the markets people choose to trade? Are there certain markets that clients seem to prefer? Do you think this will change over time?
David: There are long-term trends in markets. When I started over 20 years ago, we were approaching the end of a bull market in commodities - no one was interested in equities, they all wanted to trade gold and potatoes. Now it would seem that we might be entering into a new era of a long-term bear market with the USA on the brink of recession...
For what it's worth, I think history repeats itself - but never in the same way.
Financial-Spread-Betting: Who is predominantly making up your customer base at this time?
David: Other spread betting firms tell you that they have customers from all walks of life and from all over the country. So far, ours tend to be from the South-East and professional.
Financial-Spread-Betting: Will you stop clients who are spread-betting effectively? We have encountered traders who have worked hard to develop systems that were consistently profitable only to find that the platform broker (not Man Spread Trading) abruptly changed the rules thus killing their trading systems or worse barred the users. Please comment.
David: Tricky. We haven't really been in that situation. I can tell you that we don't skew our prices - we stand or fall by our spread wrapped around the underlying market (except daily stock indicies, where we apply a discount/premium to the futures).
I can't think of a situation where we would stop clients, but I would need to understand the specifics of the situation.
Financial-Spread-Betting: And a curiosity - What meaning does that picture with the chrome on the MF Global Spreads home page supposed to convey?
David: The recurrent theme throughout our brochure and our advertising is numbers, but we just liked the image - very "Terminator"
Financial-Spread-Betting: How do you make most of your money?
David: Spread mostly. We're very risk-averse so don't "run" customers' positions. We also take a "haircut" on overnight interest.
Financial-Spread-Betting: Do you operate any other sites besides MFGlobalspreads.com?
David: Not for spread betting, but MFGlobal.com, Choiceodds.com and GNITouch.com cover our other main additional sites.
Financial-Spread-Betting: MF Global enjoys the reputation of a dynamic aggressive company which has successfully managed to wipe out most of the competition in the commodity markets over the years. How do you see yourselves conquering the spread betting market? Why should clients choose MF Global Spreads as their spread betting firm of choice?
David: I don't see us conquering the spread betting market even if we wanted to. We're entering a very competitive marketplace, but we feel that we combine attractive spreads, an excellent online platform and a very high level of service. Hopefully, we can establish ourselves as the best place to go for people who are serious about financial spread betting.
Financial-Spread-Betting: 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?
David: I would expect some further consolidation in the spread betting markets, also, I expect binary betting to become increasingly popular. In fact we have recently acquired ChoiceOdds.com (a binary betting provider).
Financial-Spread-Betting: The last few years has seen an explosion in spread betting, cfds and more recently binary betting. Do you think it could spell the end of traditional share trading? And is the stock market feeling the pinch?
David: We'll never see the end of traditional share dealing, but it has been shaken up somewhat. It wasn't that many years ago when the same brokers who were crying foul over spread betting considered all us "Sids" selling our British Gas shares a major irritant. But now we all coexist. We all have to work harder for our money (no bad thing) but ultimately the business from CFDs and spread bets finds itself back into the Stock Exchange.
Financial-Spread-Betting: There are many sayings in the markets; do you have a favourite one?
David: Easy - John Maynard Keynes: "The market can remain irrational longer than you can remain solvent."
Financial-Spread-Betting: Do you organize any training seminars or meetings which our readers could attend?
David: We don't organize seminars at present, but hope to in the future. But we do like to meet up with our customers and prospective customers. We are always happy to arrange visits to our offices at Sugar Quay.
Financial-Spread-Betting: Any books and resources you would recommend to fellow traders?
David:
I'm quite sure that your readers are far better read than me!
I like a lot of the emails that are sent out for free - especially "Thoughts from the frontline by John Mauldin" - just run it through GOOGLE
Financial-Spread-Betting: Do you have any special offers for clients who trade on a regular basis (i.e frequent spread betters)? Are your spreads negotiable?
David: We feel that we offer a first class service at very low cost and hope that everyone will find our spreads attractive and fair. However, there are certain types of trader who, either because of their typical trades size or the frequency with which they trade will warrant a reduced rate. Nothing is set in stone and spreads are negotiable.
Financial-Spread-Betting: Any other comment you want to make?
David:
Yes, thanks for taking the time to read this - I hope it's useful
Thanks David!
>> Man Group Plc launch Manspreadtrading
The content of this site is copyright 2012 Financial Spread Betting Ltd. Please contact us if you wish to reproduce any of it.
