London Broker lost £6m Betting on Markets

It is reported that a former director of Intercapital has been declared bankrupt after incurring about £6m in losses during the market recession.

The prior director, Geoffrey Conway-Henderson lost £5.8m spread betting on energy stocks quoted on AIM with City Index – the spread betting company owned by his close friend and former business colleague Michael Spencer, who is also the founder of ICAP.

Apparently, City Index closed Geoffrey Conway-Henderson’s bets in July 2008 who was then declared bankrupt owing an additional £160,000 in unpaid interest to City Index. Mr Conway-Henderson originally joined InterCapital in the 1980s, which company was later united with Garban to form ICAP, the FTSE 100 listed interdealer broker with a market capitalisation of approximately £4.3 billion. This goes on to show that even though Conway-Henderson was a friend and past business associate of Spencer for more than 20 years, even close personal friends don’t walk away from debts of £6 million.

It is thought that City Index was forced to write off £78m in the two years up to March 2009 as clients defaulted on margin calls when the markets crashed. Less than 12 big clients – including Geoffrey accounted for the vast percentage of the losses incurred. It seems that one single client lost up to £29m after punting on one property company in Spain. This forced Michael Spencer, the owner of City Index, to invest £70 of his own monies into refinancing and reorganizing of the business.

Comments: Obviously this is not City Index’s fault but the trader’s himself however this demonstrates that spread betting and margin trading in general can be very risky activities if they aren’t treated with respect. Of course those spread betting providers offering credit betting (and unsurprisingly City Index has stopped offering credit accounts) suffered the brunt of the losses during the market crash of 2007-09. It appears that Mr Conway-Henderson was caught out by a combination of over-leverage, small cap illiquid shares, a risky sector, bad timing and insufficient free capital to meet margin calls.

Tags: City Index, cityindex, lost, spread betting, spread betting losses

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