CityIndex Interview

Interview with Dan Moczulski - Director of Sales at CityIndex UK


FSB: Tell us a little about CityIndex. Who owns City Index and how long have you been in business?

Dan: City Index was one of the UK's first Spread Betting providers when we opened for business over 25 years ago. Since then we have grown to become one of the World's leading providers of Contracts for Difference, margined FX and, of course, Spread Betting. City Index is part of IPGL, a privately owned company with a substantial shareholding in the World's leading derivatives broker ICAP plc whose CEO is Michael Spencer.

FSB: There has been something of an explosion in the popularity of spread betting in the United Kingdom over the last few years. What has been the impetus for the spread betting industry growth?

Dan: The simplicity of Spread Betting is there for everyone to see. Together with the quality of trading platforms and the increase in mobile and iPhone dealing, spread betting is the ideal way for anyone to trade the short term financial markets. The fact that all profits are tax free also contributes to its wider appeal.

It is apparent that all innovation in the retail investment market has actually been introduced by the Spread Betting and CFD industry and I think this has created a virtuous circle as more clients have been attracted. It is still possible to open a traditional stock broking account which provides 15 minute delayed data, at best. These practices disappeared from Spread Betting 10 years ago.

FSB: How different is the trading platform today from what it was when you launched?

Dan: The City Index name is synonymous with innovation, as highlighted by our brand new iPhone App - City Trading - and our platforms are constantly being improved based on client feedback.

City Index offices

City Index Reception

City Index offices

City Index Trading Floor

FSB: It is my understanding that Finspreads is also owned by City Index Ltd. - do both CityIndex and Finspreads use the same underlying trading platform?

Dan: That's right, the underlying technology associated with both is the same and the front end look and feel are also very similar. The difference is what surrounds the technology. For example, Finspreads is a Spread Betting offering and appeals to traders looking to cut their teeth in the market with minimum stakes as low as 10p per point and the free Trading Academy Course.

FSB: What types of accounts are offered at CityIndex? My understanding is that limited risk accounts are no longer available?

Dan: We feel that traders must have access to all facilities at any time. Trading an illiquid mining stock demands a guaranteed stock. A trader may not need that same reassurance when trading GBP/USD. It seems slightly unfair to limit your offering of products simply because you deem a subset of your client base only suitable for limited risk. City Index allow their clients to trade in whichever way that suits them best.

FSB: What is the procedure for opening an account? How much do I need? Is there a minimum/maximum deposit?

Dan: The vast majority of our accounts are opened online in minutes at This is by far the quickest and simplest way to get your trading underway however, if you would prefer to fill out a paper application, they are available online and we'll have your account open within 24 hours.

There is no minimum deposit required to open an account with us however it is worth bearing in mind that you will have to cover any initial margin requirements to open a trade. Although there are trades that you can do which would risk £30, you can pretty much guarantee that that £30 will be lost. I would open a spread betting account only with the acceptance that to properly pursue profitable strategies at least £300 would be required.

FSB: You are unique in the sense that one can trade spread betting / CFDs / binary bets on one platform from a single account. Please comment on how this works in practice.

Dan: That's right. At least 90% of clients only trade one of the products at any one time, however a lot of people go through a learning curve that includes both products. They may start with Spread Betting and "graduate" onto CFDs or they may be adept at CFD trading but the tax benefits associated with Spread Betting become attractive. City Index clients don't have to learn a new platform or remember different account details, they can instantaneously switch between products they wish to trade. You may trade exclusively Spread Betting but at any one time you may wish to hedge a taxable physical equity position. Obviously with City's duel account this can be done simply with little effort.

FSB: Do you offer telephone dealing?

Dan: Telephone trading is becoming increasingly redundant as the online trading platforms continue to improve. The new City Trading iPhone App allows clients to trade wherever they are. Having said that, we are not exclusively an online firm. One of the things that separates us from our competitors, and perhaps this is a legacy of our size and history in the Spread Betting industry, is that we are more than able to facilitate phone broked business, even at the busiest times. Many no frills competitors who have setup in the last few years, do not have the manning in order to provide this. Clearly, trading online for the majority of transactions is easier and more efficient but, given market movements over the last year, clients should be reassured that their broker can deal with phone calls.

FSB: Do you offer mobile phone trading?

Dan: City Index not only offers a conventional mobile trading platform but we were the first UK Spread Betting firm to offer an iPhone App. City Trading, which is available through the App Store, demonstrates our commitment to pioneering trading technology and has already broken through 10,000 downloads to become the most popular free Finance App.

FSB: What are your trading hours? Do you offer after-hours trading?

Dan: We are a global operation offering 24 hour dealing during the trading week. City Index makes prices on some markets while the underlying exchange is closed enabling our clients to trade outside of market hours. For example, its 3 o'clock in the morning, the Nikkei 225 has moved in a particular way and you are keen to get out of your FTSE position. You won't have to wait for the LSE to open, you can close your trade then and there.

Margins and Execution

FSB: Tell us about your margin rates cuts. Is this permanent?

Dan: Margin rate cuts go hand in hand with the automatic close out monitor. Pre-October 2008, clients enjoyed a certain amount of flexibility with regards to margin payments. It was not unheard of for margin calls to be met 72 hours after the initial request. The events of October 2008 illustrated that these practices, in many cases, could no longer be maintained as huge losses exceeded cash on the account. Positions which were a large hole on day 1, proved to be enormous on day 3.

The automatic close out monitor has enabled us to reward our clients with new, lower, margin rates, combined with the realization that dramatic market movements are unlikely to result in losses far in excess of cash on account.

FSB: How do margins on CFDs compare to spread betting? (are margins identical for both products?).

Dan: On the whole, markets will have identical margin requirements regardless of whether they are a CFD or a Spread Bet. There may be a legacy issue, however, which means that margin requirements are phrased in different ways. Traditionally, CFDs are associated with equities and so CFD traders are more comfortable dealing in contract sizes and expressing margin in percentages. Spread Betting, on the other hand, is all about pounds per point and so, naturally, margin factors of the bet size makes sense.

You could argue that the indefinite nature of CFDs implies margin rates should be higher but with the short term nature of trading of both products that argument probably doesn't stand up anymore.

FSB: Recently we have seen spread betting providers upping margin requirements with little or no advance notice and curbing credit accounts. What is CityIndex policy on margins and credit betting?

Dan: To say its recent is a little bit unfair. For anybody working within the industry, and clients that had positions, the events of October 2008 were extraordinary. The wholesale markets, where we hedge our positions, increased their margin rates unilaterally and across the board. A responsible Spread Betting firm hedges huge amounts of client positions. I suspect firms that didn't raise margins, perhaps didn't hedge positions.

City Index Platform

City Index Financial Spread Betting Trading Platform

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.

Dan: It is unsurprising that during the exceptional volatility of 2008 margins in certain industries were increased. Spread betting and CFDs are derivative products and therefore reflect what is happening in the underlying markets. Clients need to be aware that their broker should and does hedge positions in the market. I think it is unreasonable to suggest that clients should be immune to factors influencing the market as a whole.

Having said that, October 2008 was, hopefully, a Black Swan event and unlikely to be repeated in our lifetimes. Fingers crossed!

FSB: You have recently updated your margin policies and introduced a margin level indicator which displays as a percentage. Can you let us know how this works in practice and what we should watch out for to eliminate the possibility of trades getting automatically stopped-out? Tell us about your Margin Close Out new feature.

Dan: The margin level indicator is a visual representation of your account status to clearly show a client when they are approaching their close out level. The indicator represents the ratio of your Net Equity to Total Margin, in other words the extent that your margin requirement is covered by your available funds (cash balance +/- running P&L).

Originally, the margin close out level was set at 100% meaning that when your net equity was equal to your total margin you were closed out automatically. After receiving client feedback we have recently reduced this to 80% to provide our clients with more leeway to chose either to deposit more funds or reduce their position before being automatically closed out.

It is interesting that your questions regarding margin seem to imply that the lower the margin the better. However, lets be clear here that in volatile markets the less margin put down simply results in a quicker margin call. The margin indicator helps clients to determine whether a new position should require further funding before it jeopardises other positions.

FSB: What factors affect the margin levels? You display a margin factor that is quoted for each of the available instruments and this is a fixed amount (but in practice do margin levels fluctuate on a continual basis?)

Dan: When the margin factor is a percentage of the notional value, in other words, of the trade value, then this will continually vary as the price fluctuates. For some Spread Betting markets, however, where the margin factor is say 60 times quantity, this is not effected by price changes.

FSB: 'City Index have an execution policy that says with a few exceptions everything below 'their size*' 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).' Can you tell me exactly what this means - what determines your size? What advantage does this give me over trading through say DMA? Does it mean that a trade is executed at your published prices even in cases where is insufficient liquidity in the underlying market? And for what type of volumes are your prices valid?

Dan: It sounds like you have answered your own question. A significant advantage of being an OTC provider rather than a DMA one is that any trade within "Our Size" will automatically be executed online at the price you see regardless of what is available in the market. When "our size" is larger than what is liquid in the market, our clients are gaining a significant advantage.

FSB: How safe are client funds? What is the situation regarding our funds deposited at CityIndex? In particular are funds segregated from the company's own funds and where are client funds held?

Dan: All clients' funds are fully segregated from City Index's own money and, although we have a clause that enables us to hold money outside of the European Economic Area (EEA), client money is predominantly held with a bank in the UK.

The Platform

FSB: What are the order types that are available to be placed?

Dan: Our platforms offer a wide range of order management tools. These include stop and limit orders, contingent orders, if done orders and OCO (one cancels the other) orders.

FSB: Are there limits on how far a stop loss order can be placed from the entry price?

Dan: Non guaranteed stops have no minimum distance and can be put anywhere outside the spread. Guaranteed stops, on the other hand, have minimum stop distances that vary between markets but in general are 10% away on equities and 50 points away on indices. More than anything, this distance is there to protect the client, preventing them from being closed out immediately on opening the trade.

FSB: Do you allow clients to move stop loss orders when the markets are closed?

Dan: Yes.

FSB: What research, analysis and information services do you offer clients?

Dan: IT-Finance tick charts are available on every market with an extensive range of chart types, technical analysis and indicators. We also have Market Info sheets on every market detailing everything from margin factor and spread to minimum stake size and order distance.

Our news streams are provided by Thompson Financial and Dow Jones Newswires to keep our clients up to date with the latest information affecting the markets.

For the more technically minded trader, more advanced research information is provided by Interactive Data.

FSB: Any other perks or account benefits which our readers should be aware of?

Dan: Without wishing to repeat many of the facilities I've already mentioned, all I can suggest is that City Index offer the complete package. Whereas some providers offer some of the services, City Index offer the complete package. Clients may not need them all of the time but we can assure them that in a situation when they do, they will be available to them.

FSB: Do you offer guaranteed stops? If so, on which markets and what is the charge for using them?

Dan: Guaranteed stops are available on the majority of our markets and the charges vary depending on the product. For example, the charge on the FTSE is 2 pips. As always with guaranteed stops, you are concerned with the amount of slippage. If you feel that the potential slippage is greater than the charge, it is worth paying. If you don't, maybe use non guaranteed stops which have no charge.

FSB: Do you allow trading on FTSE 350 stocks? Smaller Caps?

Dan: Yes we do. In general, any UK stock with a market cap above £50m can be offered.

Binary Betting

FSB: How long have you been taking binary bets?

Dan: City Index have been involved in binaries for about 6-7 years now having initially entered the market by taking over Binexx, the binary betting exchange.

FSB: How does Binary Betting differ from fixed odds and spread betting?

Dan: Essentially, binary betting is a combination of the two. A binary bet is a fixed-odds type bet on the chances of an event occurring. If the event happens, the market settles at 100 and if it does not, the market settles at 0. As binary bets settle at either 0 or 100 they are often very volatile, even in fairly static market conditions, especially close to expiry. This increased volatility, together with the fact that the clients' risk is controlled with the maximum loss known in advance, means it works especially well in a betting format.

Clients can easily go long and short in much the same way as a spread bet. For example, the FTSE 100 to close up on the day, if you believe the FTSE will close up you "buy" that market, and if you believe it will fall you "sell". However, a binary bet is effectively equal to a fixed odds type bet and are classified as such.

FSB: A year or so ago you have integrated your binary betting flagship product; Binexx into the core CityIndex platform. Please comment.

Dan: In principle, the concept of offering a binary betting exchange much in the mould of other fixed odds type offerings seemed to make a great deal of sense. It turned out clients were very happy to take prices but were reluctant to leave orders with City Index essentially making the entire market. Given this, there was no real need to maintain an exchange where our prices were the only ones available and, as such, we brought it entirely in house which has enabled us to improve the service offering immensely.

FSB: Is the dealing platform you use for the binaries proprietary or do you make use of a third party provider?

Dan: Its entirely ours.

FSB: Could you walk us through CityIndex's binaries? Which markets/bet types do you cover?

Dan: In addition to the standard Up/Down binary markets, we offer Ladder binaries and One-Touch markets where the bet is settled as soon as an underlying market trades at (i.e. touches) a predetermined level.

The underlying markets that binary bets are available on include FTSE, Dax, Dow Jones, S&P and Nasdaq indices together with FX and Oil markets. The shortest market is hourly and the longest is daily.

The number of markets available has grown exponentially in the last couple of years from just 30 in 2008 to around 250 today.

FSB: How popular is binary betting with your clients?

Dan: Binary betting's appeal continues to see our business levels grow with trade volume approaching 1000 per day and a 17% increase in the last quarter of 2009.

FSB: To whom do you think binary bets appeal most?

Dan: Binary betting appeals to City professionals, seasoned gamblers and novice punters alike. It is a very useful tool for day traders, or anyone looking to profit from a static market. Its simple 0-100 range format is far easier to understand than the traditional fixed odds prices, which widens its appeal even further.

Given that binaries are essentially a form of digital option (i.e. a type of option where the payoff is either a fixed amount of cash or nothing at all, regardless of how "in-the-money" it is), means that we see some technical traders using them too. Many spread betting firms most successful clients have been short term sellers of volatility and so these people have made a beeline for binaries.

FSB: Could you give us some insight about how a binary bet is priced? How are you able to price/offer forex options with such short term "target" time frames? Do you use the Black and Scholes model for pricing bets? Do you use formulas to price bets?

Dan: All binary markets are priced as a probability of the target price occurring and we have a unique model that is complex that enables us to make the prices. It does incorporate the B&S Model.

FSB: What uses do binary bets have? Please explain with examples.

Dan: 99% of the market trades in the last 20 minutes before expiry. However, this does not necessarily have to be their sole purpose as binaries can be used as an effective hedging tool too. For example you have a FTSE spread bet open with a stop at 5450 that you are worried about being triggered. You could buy a One-Touch binary at 5450 as a perfect hedge.

FSB: What is the minimum deposit and minimum/maximum bet amounts (if there are any)? In which base currencies can clients trade binaries?

Dan: Binary bets can be traded from just 50p per point all the way up to £150 per point with instant execution. As the maximum potential loss is fixed and known in advance, this acts as the deposit requirement.

All binary bets are conducted in a clients' account currency regardless of the market being traded. This means that a client with a GBP account will trade the Dax in GBP rather than EURs. At City Index, accounts can be denominated in any major currency and so binary bets can be traded in any of these.

FSB: Do you offer limit and take profit orders for picking profits/entering binaries? If not, do you plan to offer them sometime in the future?

Dan: We do not offer any order types, only buying/selling at market. Although we used to offer a wide range of binary orders under Binexx, as I mentioned clients are particularly nervous about leaving orders, especially when you consider that any one order has a guaranteed 50% of being filled from now until expiry. To stress the reasons why you may leave an order to buy a particular binary at 60 3 hours from expiry bear no reference to that order being executed 3 minutes before expiry.

FSB: It is my understanding that you are unable to hedge binary bets. Does this mean that you will stop clients who are winning consistently?

Dan: I think it's fair to say that binary bets are treated differently than conventional spread betting and CFDs. It is perfectly possible for 100% of a spread betting and CFD firm's clients to win and the firm makes money. Binaries can be hedged through delta hedging, however, it is far easier to hedge your risk through your client base by moving your price on trades by large successful traders in the hope to attract people on the other side. Therefore, you need the successful traders in order to balance your price and ultimately your P&L.

Industry and Client Traits

FSB: What markets are most popular with your clients?

Dan: This is two-fold. Markets that are particularly volatile at the time, together with markets clients feel most comfortable with, for example the FTSE 100 Index and UK equities. However for our Polish entity this will be the WIG20 and Zloty crosses that excite clients!

FSB: What is the average holding period?

Dan: Personally, I am not comfortable providing you with an average as we have many different types of traders with some day traders holding very short term positions and others taking longer term trends. Spread betting trades are, however, a fairly short term investment, with 75% of trades lasting less than a week.

FSB: What types of client do you aim to attract?

Dan: Winning ones!! Winning clients stay with you, loss making ones don't.

FSB: Please describe your typical client. How sophisticated do you need to be to get involved?

Dan: This is impossible to do. We have some financial professionals from London surrounded by Bloomberg terminals and we have retired teachers from the West Midlands that log on once a week. The beauty of financial spread betting is its simplicity, all you need is a computer and an opinion.

FSB: Any idea of total volume of spread betting market / CFD trading industry? (as an industry)

Dan: This is never easy to quantify but according to a recent Investment Trends report there were approaching 100,000 active spread betting and CFD traders in the market in the last year.

FSB: What is growing faster at the retail level - Spread Betting or CFDs? And why?

Dan: In the UK, Spread Betting has always been the more popular, traditionally, thanks to its tax free profits. For as long as betting is tax free in this country, I would imagine that Spread Betting will continue to be popular amongst retail clients. That said, with our continued expansion into mainland Europe and across the globe, where spread betting is not offered, we are seeing a large take up of CFDs.

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.

Dan: This completely depends on volatility. The most volatile months are the busiest.

FSB: What's your view on the future of spread betting in general?

Dan: I haven't got a clue. When I started in the industry 10 years ago, the firm I worked for was opening 400 accounts a month and I never felt these numbers would increase. A decent estimation of account opening figures now for the industry is North of 10,000 a month. Who'd have guessed?

What I can say, is that I don't feel the appeal of spread betting will diminish. The events of the last year, together with the effects on peoples' pensions and coverage of financial issues in the popular press, mean more and more people have a view on the financial markets. Equally, perhaps people have made the decision that trusting your wealth to an "expert" advisor isn't necessarily best, given the mess that many of them have made. If these people wish to speculate and profit from their views spread betting is the optimal vehicle.

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?

Dan: Yes and clearly this illustrates a mistake on behalf of lower stake transactions. The bet size should not influence the entry and exit levels however, it is apparent that people let the amount of money risked influence this. This is never more apparent when clients make money on demo accounts and lose money on live accounts. Trading discipline is the single most important lesson any trader can learn and it is irrelevant how much is at stake.

FSB: What instruments might be better suited for beginners? Indices, equities, shares, forex?

Dan: The best instrument for a beginner is one that they know best and has a level of volatility they are comfortable with. However, I'd say it is not necessarily what they trade that's important its more how they trade it. Research your market, understand your upside, understand your downside, decide your stake, half it and possibly half it again, and then dip your toe in the market in a way that emotions will not overtake your trading discipline.

FSB: Do you envisage that there will be major regulatory changes with regards to spread betting in the future?

Dan: I don't foresee any regulatory changes specific to spread betting but clearly changes to the underlying market will have an effect. The short selling ban at the beginning of last year demonstrates this. We are going through a process of regulatory changes; some which make sense, some perhaps that make less sense. I couldn't guess where we may be in 5 years time.

FSB: What differentiates you from other competitors?

Dan: Longevity, our continued commitment to technology and innovation, and the fact that we listen to our clients and want them to succeed.

FSB: We know that most if not all spread betting providers provide a market maker platform (i.e. quote driven platform). What are the advantages of this platform as opposed to dealing directly on the market (i.e. direct market access)?

Dan: It is important to remember that spread betting firms derive their own prices from the underlying market but many clients do not appreciate what this underlying market actually is. For example, the FTSE 100 Index is not a market. It is a number that reflects the movements of the 100 firms considered to be the UK's largest. Spread Betting firms allow you to trade on it. They base their price on the movement of the futures market as this reacts quicker and encompasses all 100 firms, and remove fair value to create a daily price.

Equally currencies do not have a "price", no exchange is dominant and the interbank market is huge, so again it is difficult to define the underlying market. This is not the case, for example, on equities where most providers' price mimic the market.

OTC products allow larger and smaller transactions than accepted in the market, they facilitate 24 hour trading and they remove the risk of not being filled.

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?

Dan: Hmmmmmmmmm. I think anybody who feels the retail derivative market influences the underlying markets is perhaps overstating its reach. Clearly in illiquid stocks any kind of buying or selling will influence the price, however, lets not forget prices are determined by buyers and sellers. How is a price distorted if buyers and sellers are allowed access to the market. Surely it would be distorted if half of the market participants were banned. A perfect illustration is the ban on short selling financial stocks. Volatility did not decrease.

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

Dan: We regularly hold seminars in our state of the art Client Education Room in the City and will be expanding our educational resources in the coming months with a library of Webinars and wealth of other support materials.

FSB: Have you any parting words for our readers?

Dan: Stay lucky!

FSB: And that concludes our interview with Dan of CityIndex. Thank you for your insight and time, Mr Moczulski

The content of this site is copyright 2016 Financial Spread Betting Ltd. Please contact us if you wish to reproduce any of it.