|
Spread betting traders are no longer trying to pick a top to the stock market, and instead have positioned themselves for a pre-Christmas run in the FTSE and the Dow Jones.
Bookmakers said punters appeared to be talking of the FTSE rallying all the way to 5020 during December, building on the gain of more than 250 points seen in November.
CMC/deal4free said punters spent today going long - that made them money in the first few hours, but they then gave much of it back as the Dow came off in New York trading hours.
IG Index said it was still seeing a lot of shorting of the dollar today, even after a big fall in the US currency over the last two weeks, to below 103 Japanese yen and to the area above 1.32 on its rate against the euro.
Cantor Index said its clients have mostly been short of the greenback and have made good profits on it in November.
However other bookies say many punters have struggled with the dollar's move this month, trying unsuccessfully to pick a bottom for it.
Trading in oil has calmed down a great deal since the flurry in October and the Nymex's peak at $55, but bookies said they were seeing a trend of people shorting the US Treasury bond in the hope of benefiting from a fall if the Chinese revalued their currency, the yuan.
IG said that trading in large cap stocks has been subdued lately, with punters showing more interest in smaller stocks such as Pan Andrean, Asos and Bioprogress.
Finspreads today launched a new orders system, enabling punters to place limit and stop-entry orders on-line, without actually having a trade already open. Its system has offered on-line stops and guaranteed stops for many months.
Spread betting punters are stubbornly trying to short the FTSE100 index and Dow this week, even though that strategy has failed to pay dividends over recent days.
Bookmakers said traders have done better in recent days with short positions on oil, as the December Nymex price has slipped back from $55 to $46 a barrel, and they have also made money on some individual stocks.
IG Index said that the arrival of the FTSE at the 4820 resistance level this morning sparked selling by clients, who appear to believe that the rally has gone far enough for the moment.
Finspreads said its customers are short of the main UK and US indices, but that they have done better on the German Dax, some people buying it just below 4000.
Among the active stocks for spread betting punters have been Bioprogress, Dana Petroleum and BSkyB, all favoured by bulls, and Vodafone, where Finspreads clients have been moving short.
On currencies, IG said punters were selling the dollar despite its establishment of new lows against the euro. One popular trade was to go long of the pound against the dollar, on the hope that sterling might revisit its highs above 1.90 of earlier this year.
Finspreads said that clients were very long of gold, and had made money on the recent advance. They were also long of both the euro and the pound against the dollar.
IG is now quoting spreads the Chicago Board Options Exchange's VIX index - this measures the volatility of the S&P500 index implied by options prices.
Recently volatility has been declining relentlessly from over 40% in late 2002, to around 13%, or 130 on the VIX index.
Each week, our spread betting round-up reveals the biggest bets being made by punters on shares, indices, currencies and commodities
SPREAD-betters have returned to the markets with gusto. And about time too! The majority of traders scaled back their activity during the summer months maintaining a cautious stance ever since.
But following the US election result, spread-betting volumes started to soar, reaching a seven-month high in the last five days. And with action in everything from stocks to oil there's been plenty to focus on. None more so than the FTSE 100 index.
Traders jumped in with both feet as soon as the Bush win was confirmed. Accompanying this, the balance of trades in the Footsie has taken a positive shift. Prior to the recent boost in volumes, investors made an equal number of 'buy' bets compared with 'sells'. This week however has seen a surge of buyers, now reaching a ratio of two 'buy's for every one 'sell'.
A market stutter following the election result briefly threatened to wrong-foot spread-betters with a sudden switch in sentiment. But it was the US that came to the rescue. Dow Jones traders noted that the charts look positive, targeting 10,500 in the next few days, and then 10,800 as the next objective.
Most Footsie traders expected to see the market reach 4800, as it did briefly today, following the recent break above October's 4735 high-tide mark. But the medium-term outlook is slightly less certain.
Cautious traders point out that if current buying dries up the Footsie could see a sharp sell-off, pushing the market back down to 4660. As usual spread-betters will need to be quick on their feet and ready to take profits at a moment's notice.
Elswhere spread-betting volumes have been concentrated on just a handful of stocks. Yell gave traders something to shout about with its solid set of results on Tuesday. And while bank-dealers had expected a negative set of results, spread-betters bought shares between 360p and 365p ahead of the announcement. Profits came quickly, and as usual spread-betters were keen to lock in their gains. Most sold at 400p, and went home happy.
Looking ahead, traders are focusing on their favourite sector - telecoms. Both Vodafone and mmo2 are set to release interim results, and for spread-betters it could be another adrenaline fix in volatile markets.
Vodafone traders are looking for a continuation of the three-month bull-trend, and the majority of bets are buys.
Closely following the Vodafone results come those of telecom baby mmo2. A spread-betters favourite, most have won and lost plenty of bets earlier this year as bid speculation abounded.
Dutch company KPN confounded traders when their bid for mmO2 failed earlier in the year, letting the share price down unexpectedly. But we still have the 'buy bug'. And recent strength to 107p has re-ignited memories of the 2004 high-point at 115p. Spread-betters are still buying.
The Financial Services Authority (FSA) has fined Cantor Index Limited 70,000 for running a misleading campaign promoting spread betting. The company's senior management failed to ensure there were adequate systems and controls in place to ensure that its financial promotions were systematically monitored.
This failure resulted in the misleading advertising campaign entitled 'Free Xda' for Cantor Mobile, the firm's new spread betting device. The promotional material, which included flyers handed out at London stations, posters and advertisements on television and in the popular press, did not contain adequate warnings about the risks of spread betting and consequently put a large number of potential customers at risk.
In fixing the amount of penalty the FSA has recognised that no customer of Cantor Index suffered any loss as a result of these failings and the potential impact of these failings was mitigated by the remedial action since undertaken by Cantor Index.
Cantor index, the spread betting firm, has been fined by the Financial Services Authority (FSA) for alleged misconduct, and is appealing the case to the Financial Services & Markets Tribunal.
The appeal, which is unlikely to be heard until next year, follows a meeting of the FSA's Regulatory Decisions Committee last month, where Cantor failed to persuade FSA enforcement officials to reverse the decision.
The FSA would not comment on the size of the fine, or the reason for the disciplinary action, but confirmed that Cantor is appealing against an enforcement decision. Cantor Index, and its parent company, Cantor Fitzgerald, declined to comment.
After exponentially increasing the number of fines and individual bans this year, the regulator has seen a huge increase in appeals waiting to be heard at the Tribunal.
More than 25 appeal cases against the FSA are waiting to be heard, of which only a handful have yet been allocated a date.
Among the companies involved in recent appeal cases is Legal & General, which is waiting to hear if it has been successful in overturning a £1.1m fine for alleged endowment mis-selling.
In total, the FSA has successfully collected more than £20m in fines from more than 20 companies over the past year.
Cantor is no stranger to legal clashes, having already fought two battles in the courts against former employees this year .
The Streets star Mike Skinner has admitted blowing his fortune on gambling. The rapper has splurged tens of thousands during boozy betting sessions - and has even been forced to remortgage his house to make ends meet.
The Streets' Mike Skinner has confessed to wasting so much money on gambling he even had to remortgage his house.
 |
The Brummie rapper says a heady cocktail of boozing and too much cash in his pocket saw him waste thousands of pounds.
Skinner, whose band recently scored a massive hit with Dry Your Eyes, told Time Out: "I was getting too drunk and betting too much money."
"I was even getting into spread betting. It's scary, I've lost a lot," added the baby-faced rap star, who admitted to remortgaging his house at one stage.
Not that he's too bothered though. Skinner is known to shun glitzy showbiz events in favour of a game of pool and a few jars down his local.
He added: "Hey, I'm a reasonably successful musician. I was bound to go through that at some stage."
Both The Streets albums, Original Pirate Material and A Grand Don't Come For Free, have been nominated for the coveted Mercury Music Prize in the past.
A CITY worker placed millions of pounds of spread bets using insider knowledge from his job at a major investment bank, a court was told today.
Asif Butt, 34, was a compliance officer with Credit Suisse First Boston, handling highly sensitive commercial information which he then passed on to four friends who made the bets for him, it was alleged.
Butt and his accomplices were said to have made 'considerable' amounts of money.
The bets were said to be worth about £2m and involved predicting movements in share prices based on the knowledge Butt gained in his job.
Butt and his co-defendants, Ian Beale, Richard Rudson, Daniel Masters and Alexander Coleman, are all charged with conspiracy to commit insider dealing between 31 July 1998 and 17 January 2002, when they were arrested.
Opening the case at Southwark Crown Court, James Curtis QC, prosecuting, said: 'Mr Butt, who is the one whom we will concentrate on, was the person on the inside. His accomplices and co-defendants were on the outside, they did not work for the bank.
'Mr Butt had an exceptionally responsible job in the bank.
'From the very first day he began at the bank he was appointed to the secure control room through which the highly sensitive information was passed and monitored, to keep it secret. That is what he was there for. He knew as well as anyone could that the information he held could enable him to make considerable personal gain for himself or others if he were to use the secret information on the outside.'
His knowledge gave him a chance to deal in the shares of the companies he was learning about or indeed to enter into commercial bets, known as spread bets, Curtis said.
'These bets are on the likely movement up and down of shares and it gave him the opportunity to do that before the facts became public knowledge, if indeed they ever did,' Curtis said.
'He would have known that in that job he must not pass information to the outside and must not make personal use of that information - but he abused that trust, he deliberately did just that. He took care not to let any of these trades take place in his name as that would, of course, lead straight back to him.
'He had on the outside confederates, accomplices and friends, who, the prosecution say, were aware of what he was doing.'
The court was told that Butt received up to 80% of any winnings.
Curtis added: 'All the defendants succeeded in enriching themselves quite seriously and substantially.'
It is understood that commercial spread betting firm IG Index noticed unusual patterns in several large bets and called in the police.
Butt, from Watford, and his co-defendants deny the charge.
The hearing continues.
Anyone who bet on the Bank of England base rate reaching five per cent or above by Christmas looks to have lost their money.
And the doom-mongers' bubble looks to have burst with a hugely satisfying pop.
The rise in house prices was unsustainable and was going to result in tears, they said.
Interest rates would have to go on going up, homeowners would default on their mortgages and the market would come crashing down to earth with the velocity of a failed Chinese or European space satellite, they cried.
But it now looks increasingly likely the current rates cycle has peaked at a reasonably modest 4.75 per cent.
The consensus among economists (if indeed there is such a thing) is that the Bank of England will allay homeowners' fears this week by pegging base rate for the third month in a row.
There are a number of reasons for thinking they are right.
First, the five quarter-point rises imposed by the monetary policy committee in the last 12 months finally look to have done the job they were intended to by bringing the housing market back down to earth softly and relatively painlessly.
Second, the MPC will probably want to study the all-important Christmas and New Year retail sales figures before taking the next step on base rate.
Third, there is growing speculation that Tony Blair could call a snap election as early as February (after making this correspondent look a chump by not going to the country this autumn).
Fourth, there are signs that economic growth looks increasingly sluggish.
John Butler, an HSBC economist was on record as saying at the weekend: "For now, with growth softer and consumer inflation benign, the Bank will feel it has time on its hands before it needs to act again."
And the Press Association reported Investec's Philip Shaw as saying a true economic down-swing had not arrived and rates may have a little further to rise early next year.
But in keeping with his business, David Buik of Cantor Index, the spread-betting firm that allows City wallahs to lose huge sums of money by plonking it down where their mouths are, has demanded that the Bank cuts base rate in the New Year.
Now that really would make a February election look a racing cert.
The interminable surveys beloved of financial firms keen to get their names in the papers yielded one gem yesterday.
It seems that "rate tarts", the derogatory label slapped on folk with the financial savvy to make the system work in their own favour rather than the banks, are costing credit card providers a satisfying £1 billion a year in lost revenues by constantly switching between those offering zero per cent interest on transfers.
What's the betting that providers suddenly discover the virtues of "customer retention" and quietly put zero per cent offers to sleep?
In what's been described as the most exciting contest in years, British bookmakers expect to see more than $9 million bet on the American election by the time it's all over on Tuesday.
Taking wagers over the phone, over the Internet and in person at thousands of legal betting shops across the country, long-established bookmakers such as William Hill and Ladbrokes said that interest in the U.S. election had more than quadrupled since 2000.
While not as big an event as Wimbledon or the soccer World Cup, Ladbrokes spokesman Warren Lush said Friday that this U.S. election dwarfed the amount of money taken in any recent Superbowl or World Series.
"If you're over here, it's the main news," Lush said. "It's arguably the most important election in the world. Plus it's got all that drama and razzmatazz. The British general election will be nothing compared to this."
Under liberal gambling laws, bookmakers here are allowed to offer odds not only on sporting fixtures, but also on a whole range of other events and possibilities.
From whether or not it will snow on Christmas day to the winners of televised dance contests, British citizens can usually find someone to take a bet on whatever their hearts desire.
Not only are firms offering odds on the eventual winner of the election, customers can also bet on the overall electoral vote won by each candidate and individual states captured by each party.
Lush said that while his company was probably taking a number of bets from expatriate Americans, it followed industry practice by not accepting bets from people residing in the United States.
Graham Sharpe, spokesman for William Hill, said last week that betting has been fairly evenly split between George Bush and John Kerry. As a result, his company was facing very little risk, whatever the eventual outcome.
"From a bookmaking position, it's a very happy situation," Sharpe said. "People have been betting very evenly, so you don't have an exposed position."
On Sunday evening, William Hill had George Bush at odds of 1 to 1.57, with John Kerry at 1 to 2.25, reflecting similar stakes posted by other companies.
Professor Leighton Vaughan Williams, director of the Betting Research Unit at Nottingham Trent University, said British bookies will see at least five million pounds ($9.17 million) taken on the U.S. election.
In addition, he said that spread-betting firms, which take bets on the range of electoral votes won by each party, should handle around one million pounds ($1.83 million).
Englishmen, he added, had a long history of wagering on American elections. Tradition had bets placed on George Washington's first election - in 1789 - and recorded gambles dated back to 1868.
Vaughan Williams said that bets were more accurate than polls when it came to predicting election winners. In the recent Australian general election, opinion surveys had been all over the place but the betting consistently favored Prime Minister John Howard, the eventual victor.
"In the end, the bets were more accurate than the polls."
Despite this, Vaughan Williams said that he was very wary of trying to say who would win on Tuesday.
"Right now, Bush has a 52 percent chance of winning," he said. "It's the closest I've ever seen it."
BRITISH bookmakers and betting exchanges are set to take almost £20m worth of trades on the contest between George W Bush and John Kerry by the time the US Presidential election results come in on Tuesday night.
Many high-flyers in the financial markets - including, it is rumoured, hedge fund billionaire George Soros - have been placing bets on Bush-Kerry through firms over here, because such betting is not permitted in the US.
The biggest slice of business is going to Dublin-based betting exchange Tradesports which had taken $15m (£8.2m) of trades on the election by yesterday and is hoping to reach $20m by next week.
Tradesports chief executive John Delaney said digital odds offered by his firm's customers imply that Bush has a 54.2% to 56% probability of winning. 'We are seeing some of the largest individual trades we have ever seen on this exchange, including $100,000 from one client as an initial trade,' he said.
London-based betting exchange Betfair had matched £3.1m worth of bets on the overall result by yesterday. It was quoting the Republicans to win at the equivalent in fixed-odds terms of 3-4 on, with the Democrats at the equivalent of 5-4 against.
Spread betting firms have also been taking a stream of bets on Bush and Kerry. At IG Index, one Russian client stands to make £30,000 if Bush wins while other traders have positions of more than £1000-a-vote on the electoral college. At Cantor Index, its Spreadfair offshoot was yesterday quoting Bush to win 275-280 votes in the electoral college, and Kerry to win 258-263.
Cantor's David Buik said: 'We've taken five times as much business on this US election as we took on Bush-Gore four years ago.'
Fixed-odds bookie Blue Square had taken £98,000 of bets by yesterday-and plans to keep quoting odds all the time as the results come in on Tuesday night.
Betting prices quoted by Tradesports, in particular, are frequently covered by the American media as an alternative to the opinion polls for gauging the fortunes of the two candidates.
That has opened up the intriguing possibility that some partisan elements in the US might place large bets on their candidate on this side of the Atlantic in order to generate favourable publicity back home.
The company will advertise its products in the national press to educate customers about its services.
Mr Murray said customers will also be able to pay with Lasercard, which may make the services more attractive in Ireland.
"Based on customer research we believe that the ease of payment and simplicity that this capacity will introduce for our customers is going to significantly increase the number of daily transactions that we handle."
The company will also run a series of regional seminars throughout the country starting early in the New Year.
IG Index turnover over nearly £48 million €69m and had profits of £23m in the year to May 2004.
The company is owned by venture capital group CVC Capital Partners.
IG Index, a global spread betting firm, today said it intends to target the Irish market.
The company offers betting prices in a wide range of stock indices, currencies, commodities and options, as well as individual shares. The company today said it has had a number of Irish based clients on its books over the past few years but has now, for the first time, made the decision to proactively target the Irish market.
Commenting on the decision, Company Director, Michael Murray said that financial spread betting has grown exponentially in the last decade because it offers traders and investors a unique combination of flexibility and speed of execution.
All transactions are recognised as bets and therefore profits are exempt from capital gains tax. IG business in Ireland has shown a marked increase over the past two years with very little specific targeting. We believe that if we invest in building our brand in Ireland we can increase our business dramatically," he said.
IG Index, the spread-betting firm, could return to the stock market less than two years after being taken private by CVC Capital Partners, the private equity firm.
CVC is understood to be looking at a possible flotation of IG as early as the first quarter of next year. The plans are believed to be at an early stage, but CVC has been encouraged by a surge in IG Index's profits over the past year.
CVC bought IG Index for £143m in August 2003 in a deal that saw Stuart Wheeler, the chairman and a high-profile donor to the Conservative Party, pocket £34m for his stake. However, bankers believe a flotation is likely to value IG Index at more than £250m, allowing CVC to book a profit of close to £100m on its investment after the costs of repaying IG's debt.
IG Index is thought to have seen a huge surge in sales of its so-called "binary betting" products. These are similar to fixed odds betting and allow punters to make highly leveraged bets on financial markets such as the closing price of the FTSE100 index. The products are not regulated and have been hugely popular in the past year, especially with online gamblers.
One banker said that IG Index's binary betting business has grown from nothing a year ago to account for about 25 per cent of the company's turnover. IG Index is thought to be on course to make a profit of about £25m this year, compared with £15m in 2003.
EACH week, our spread betting round-up reveals the biggest bets being made by punters on shares, indices, currencies and commodities:
THE last few days have seen spread-betting volumes soar. With action in everything from the Footsie index to oil it's difficult to decide what to focus on. But yesterday it was cerainly Morrison's shares.
Spread-betters have been frantically trading retailer Morrison's following their blockbusting set of results yesterday.
Starting yesterday at 195p, traders quickly realised that this stock was set to rocket. After market-makers pushed prices higher on the market open, spread-betters managed to start buying at 205p.
And they weren't to be disappointed! Morrison finished the day as the top Footsie gainer, at 222p, a whopping 15% gain.
So what next? Most spread-betters chose to take their profits and run, but a minority are expecting even more gains over the next couple of days.
This astonishing rise was set against a turbulent Footsie index. Having started strongly, the index crumbled to trade briefly below 4600 before finishing the day just 1 point higher than the previous day at 4617.
What's clear is that the market has at least for now stalled in its climb. This comes as a welcome relief for many spread-betters who've been selling the market, expecting a Footsie dive. And having spent weeks hanging on by their fingernails and racking up some pretty unpleasant losses, some good news was very welcome.
A vital point worth noting is that the balance of trades in the index has today taken a more positive shift. Last week's spread-betting selling spree has started to slow following the Footsie's fall.
Right now there are slightly more buyers than there are sellers. This is made up of a mixture of profit takers and new buyers.
The investor sentiment index has moved from 2 sells for every 1 buy last week, to current levels of 1.5 buys for every 1 sell. A substantial reversal.
The bulk of the global jump - a 27% surge from (pounds) 834bn in 2001 - can be put down to the greater number of foreign currency trades necessary in an increasingly globalised and interconnected world, along with a spike in the number of forex-betting hedge funds.
James Parker, a forex trader with financial spread-betting specialist City Index, said that while private-individual foreign currency bets ranged from around (pounds) 3 to (pounds) 1000 per punt, the quantity of bets had increased by more than 800% in the last 12 months alone.
Parker added that the betting "tends to increase when the currency markets are at their most volatile", and that the most common currency trades over the past year have been sterling/US dollar, followed closely by euro/dollar, dollar/ yen and dollar/ Swiss franc.
PRIVATE individuals taking a punt on currency markets are playing a fast-growing role in the burgeoning global business of foreign exchange, which has skyrocketed to a spectacular (pounds) 1.1 trillion worth of trades each day.
Moreover, according to the triennial survey of foreign exchange and derivatives markets by the Bank for International Settlements - which involved 52 central banks - more than half of all global daily trading occurred in the UK.
The bulk of the global jump - a 27% surge from (pounds) 834bn in 2001 - can be put down to the greater number of foreign currency trades necessary in an increasingly globalised and interconnected world, along with a spike in the number of forex-betting hedge funds.
However, the role of private punters has also continued to grow exponentially.
James Parker, a forex trader with financial spread-betting specialist City Index, said that while private-individual foreign currency bets ranged from around (pounds) 3 to (pounds) 1000 per punt, the quantity of bets had increased by more than 800% in the last 12 months alone.
"The increase in interest in foreign exchange betting is massive," said Parker.
"It began with the downturn of the Nasdaq bubble, when non- institutional shareholders started to drift out of the traditional equity markets.
"But there is also the point that people are able to bet on currencies easier now than ever before, particularly with direct internet and phone services available."
Parker added that the betting "tends to increase when the currency markets are at their most volatile", and that the most common currency trades over the past year have been sterling/US dollar, followed closely by euro/dollar, dollar/ yen and dollar/ Swiss franc.
Perhaps most startling, however, is the exponential growth in the number of traders in foreign currency options and derivatives, which some industry experts said increased by a factor of 25 over the past year.
Parker said many private individuals now "seem to be acting on snippets of information about relations between countries".
According to the BIS study, foreign exchange market turnover in the UK increased by 49% between 2001 and 2004 to (pounds) 418bn per day - with London maintaining its position as the world forex capital. The US increased its turnover 82% to $461bn ((pounds) 257bn) .
The largest percentage growth - 94% - in the three-year period was in "outright forward transactions", the sale or purchase of foreign currency more than two business days after dealing.
The next largest growth area was spot trading, which is the exchange of two currencies at a rate agreed on the date of the contract, which climbed 47%.
The study also noted outright forward trades accounted for 14% of total UK foreign exchange activity, compared with 11% in 2001. Electronic trading accounted for 55% of all foreign exchange activity.
Elan is now available for trading from 8:00 to 21:00. The market will be based on movement in the Elan share price in the Irish and US markets. Prices will be quoted in Euro. We don't wish to brag but we are pretty sure that we are the only financial institution to offer such extensive trading hours in Elan.
Introduction of CommoditiesDelta Index have recently introduced both a Brent Crude Oil and a Gold contract. The Brent contract trades from 10:05 to 19:29 and has an IMR of 200. The Gold contract trades between 08:00 and 21:00 with an IMR of 150. The commodity markets have seen significant volatility this year and financial spread betting is the only way that the private investor can access these markets.
Introduction of Daily Cash Currency ContractsDelta Index have introduced a Daily Cash €/$ contract. It runs from 08:00 to 21:00 and all open positions will settle at the mid point of the Delta Index closing price at 21:00. This contract will be based on the cash price unlike the quarterly contracts, which are based on a futures price. The IMR is €150 per €1 stake.
Spread betting punters are persisting with bets aimed at making money from a reversal of the FTSE100's recent out-performance against the Dow.
The UK index has risen 5% relative to the Dow since the beginning of September, a move that many traders seem to think is not sustainable.
Finspreads said that its clients have continued to be net short the FTSE, and net long the Dow. The US index last week lost its grip on the 10,000 level. FTSE has been clinging on grimly to the area above 4600.
Among individual shares, Tradindex said it had seen buying of Matalan, and Montericco Metals. IG Index reported selling of HIT after its results earlier today.
Oil remains one of the busiest spread betting markets, with the majority of small traders trying to pick the top, or holding onto to short positions that are well into the red. Some larger punters have turned long once again around $52 on December Nymex, bookmakers said.
Traders also remain overwhelmingly long of gold, despite the yellow metal's failure to break the $425 level on several occasions.
Finspreads said that positions in currencies are mainly short of the dollar against the pound and the euro.
IG said that a large number of clients had got short of copper ahead of last week's 11% correction in one day, leaving the bookie nursing five-figure losses.
SAN FRANCISCO (CBS.MW) -- Exotic derivatives are going mainstream and down-market.
HedgeStreet launched this week, offering what it calls "hedgelets," which are akin to binary options but with a much lower price point: just $10 apiece, thereby carrying a much lower risk factor than other derivatives. Visit the site.
The wagers themselves also carry potentially broad appeal, including bets on average housing prices and federal economic data announcements.
Such wagers have previously been the domain of privately negotiated contracts called "exotics."
The exchange is also offering hedgelets based on conventional derivatives, such as interest-rate and commodity bets.
"Approximately 20 million Americans have online equity brokerage accounts but only a fraction of these actually trade derivatives. We believe that a fair portion of the remaining number are likely to participate over time, provided the methodology for doing so is easy to understand and it is financially and technically within their grasp," said Russell Andersson, co-founder and vice president of instrument generation, in a recent interview with FOW magazine. HedgeStreet officials said the exchange's grand opening will take place Oct. 19.
A Crown Court Judge has recently ruled that spread betting was not "gambling" within the meaning of the Insolvency Act 1986.
A defendant appeared before Bolton Crown Court in relation to an alleged offence that he had materially contributed to or increased the extent of his insolvency by gambling within the meaning of Section 362 (1)(a) of the Insolvency Act 1986.
He had placed numerous spread bets with three spread betting companies and had lost a sum of just over £23,000. Those losses formed a significant proportion of his debt as at the relevant date.
The Department of Trade & Industry had prosecuted the case on the basis that the defendant's activities amounted to gambling. The defence contended that all transactions carried out by him were investments, enforceable at law and accordingly his actions could not be construed as gambling.
Following the ruling of the Judge, the Department of Trade & Industry offered no evidence and a not guilty verdict was returned. Had the defendant been convicted of this offence he could have received a two-year sentence of imprisonment, a fine, or both.
This ruling will certainly be of interest to individuals who have been convicted of materially contributing to their insolvency whilst using spread betting companies and who may be considering appealing against their conviction and clearly of relevance to anyone currently facing such a charge.
|
Further details can be obtained from Nigel Roberts or Stephen Lickrish of :
Cooper Kenyon Burrows, Manchester - Telephone No: 0161 834 7374 who can also be contacted by e-mail at nigelroberts@c-k-b.com and stephenlickrish@c-k-b.com
|
New rules to prevent insider dealing by directors using spread bets, or contracts for differences, are to be introduced by the Financial Services Authority.
The rules, which come into force on December 1, will bring such "synthetic investments" under the same code as that governing directors buying and selling shares in their own companies. Directors are not allowed to deal in their company's shares during close periods, before stock-market announcements or while holding price-sensitive information.
The new rules attempt to close a loophole exploited by Paul Davidson, the entrepreneur known as "The Plumber", who took a £5m spread bet on the flotation of his company, Cyprotex, with City Index, a spread-betting firm.
City Index used tax-efficient contract for differences to hedge its position, effectively shoring up the float price. Mr Davidson has been fined £750,000 by the FSA, but has not paid it.Michael Foot, FSA managing director, said the new rules would "ensure controls on directors' dealings in shares keep up with market developments". Paul Austin, at spread-betting company IG Index, said he had "no problem" with the new rules, but there was "no evidence" directors were increasingly using such instruments.
SPREAD-BETTING used to be largely the preserve of thrillseeking City traders, taking punts on anything from the ups and downs in the FTSE 100 index of leading shares to fluctuations in oil prices, or Kevin Keegan's tenure as Manchester City manager.
But this highly risky form of gambling, where you "buy" or "sell" the movement of a market or an index, has recently gained a new following among people that do not have a view on the outlook for Brent Crude, but who do feel they can back their hunches when it comes to property.
Spread-betting on the housing market is a growing craze, with most players speculating that prices in London and the South East are set to slide. This is known as "shorting the market". The recent wave of betting was sparked by recent warnings of falls in the property market.
The new property spread-betting gang includes women who would never venture inside a high street bookmaker's shop: you can place your spread-bets online or over the phone. Another attraction is that any profits are tax-free, supposing that you make a profit. The appeal of property market spread-betting also lies in the ability to make money out of bricks and mortar without hassle.
The price to pay for this convenience is that spread- betters who get it wrong can find themselves facing unlimited losses, for which there is no compensation.
IG Index, the spread-betting firm, prices its property market bets using data from the Halifax House Price Survey. Punters can bet on the prices of houses nationally, or in a specific city or region, and have the option of capping their losses.
The firm is predicting that the average price of a London house will fall 5.6 per cent from £244,600 in June to £230,900 next June. But some contrarian gamblers are determined to defy the property pessimists by taking a punt on the market in the capital remaining resilient. IG does remain confident that the Scottish market will stay buoyant, with average prices climbing from £95,700 to £102,400 by next September, a rise of 7 per cent.
As we explain below, the property market is just one area in an ever-increasing range of spread-betting opportunites. All are complex and dangerous. Anyone who cannot afford to lose money should read and marvel, but stay away.
Currency trading is becoming more popular, according to such firms as Finspreads and Capital Spreads. Simon Denham, of Capital Spreads, says: "Spread-betting on currencies is as close as private investors can get to trading the inter-bank rates used by financial institutions."
Further information can be found on websites such as onewaybet.com.
Although technically not a spread-bet, binary bets are the latest craze among clients at IG Index. Structured to give gamblers the chance to profit from short-term market fluctuations, a binary bet is typically placed on the probability of movements in markets such as the FTSE 100 index. This may sound simple, but the workings of the binary bet system are anything but.
IG Index will take a view on how likely it is that the FTSE 100 will move in a certain direction. Odds of 50 per cent imply that the market will stay flat. If the firm offers a 90 per cent chance that the index will rise, this means that it is likely that the index will close higher. Say the FTSE 100 has been 11 points up all day, suggesting that the market will close at a higher level than the previous day, IG Index could decide that there is a chance of between 6 per cent and 9 per cent that the index will fall and close at a lower level. If you believe that the firm is wrong, and the index will fall, you buy at 9 per cent.
If, after you have made your bet, the FTSE 100 falls, IG will change its odds. The firm now believes there is a 40 per cent chance of the index finishing lower than the previous day. Your profits will derive from the difference between the original 9 per cent chance and the new 40 per cent chance.
Spread-betters have been looking at US shares for opportunities in volatile stocks. Google, the internet search engine, has topped the list of must-have stocks after its flotation on Nasdaq. Will Armitage, of IG Index, believes that many spread-betters realised the potential of US stocks when they saw investors shorting Google shares in the unofficial grey market before the company's flotation last month.
Cantor Index, another spread-betting firm, says that the recent upturn of the S&P 500 and Dow Jones industrial average has buoyed gamblers, with Wal-Mart, Sears and Nike all attracting attention.
If this all seems too complicated, then Cantor Index is taking fixed-odds bets on the possibility of four different events taking place during Manchester City's match at Crystal Palace today. Will City win? Will David James keep a clean sheet? Will Nicolas Anelka score? And will Danny Mills be seen hugging Kevin Keegan at the final whistle on Match of the Day.
Oil prices may have eased back from their recent highs, but they are still up by more than 30% since the beginning of the year.
And with global production still barely keeping pace with soaring demand, analysts say there is every chance that prices could take off again.
For industrialised oil-consuming countries, sudden price surges of this kind are bad news.
They take money out of the pockets of businesses and consumers that would otherwise be spent on creating jobs or buying goods, acting as a brake on economic growth.
But they present a golden opportunity for investors brave enough to have a bet on the direction of the price.
Investment banks and hedge funds have been doing just that over the past three months.
Indeed, oil producers' cartel Opec - and many independent analysts - believe heavy speculative trading by big financial institutions has itself contributed to the latest jump in prices.
But making money from oil is no longer the sole preserve of Wall Street giants.
Last year's surge in oil prices during the run-up to the Iraq war created strong demand for financial instruments which would allow private individuals to profit from oil price rallies.
Several banks have responded with a range of derivative products such as warrants, which give investors the right to buy oil at a pre-determined price at some point in the future.
But the spread bet has this year emerged as by far the most popular means for private individuals to join in the oil trading bonanza.
It's easy to place a bet, but it's just as easy to lose a great deal of money - Alpesh Patel, private investor 
Will Armitage at London-based spread-betting firm IG Index says the number of oil transactions the firm handles has gone up "hugely" in recent months.
"Our customers are drawn towards volatility, and nothing has been as volatile as oil this year," he said.
So how do spread bets on oil work?
In a typical scenario, the spread betting firm will tell the investor that it expects the oil price to fluctuate within a range, or spread, for the foreseeable future.
The investor can bet either that the price will rise above that range, or that it will fall below it.
In either case, if he is proved correct, he wins back his stake for every cent by which the oil price breaks out of the quoted range.
For instance, if an investor bets £2 that the price will rise above a quoted range of $40.80 - $40.90 a barrel, and it then jumps to $40.95, he stands to win £10.
Spread bets therefore offer high returns to those who call the market correctly, and also have the great advantage of being easy to place.
 |
All it takes is an account with a spread betting firm, and a two-minute phone call.
Crucially, they also allow investors to bet on a fall as well as a rise in prices - a highly useful feature in the rapidly changing oil market.
But the catch is that spread betting is particularly unforgiving to those who bet the wrong way.
The investor who calls the market incorrectly must pay the spread-betting firm his stake for each cent by which the price misses the upper or lower end of the range.
In the example above, if instead of rising, the oil price fell to $40.75, the unlucky punter would lose £30.
Unlike the conventional gambler, therefore, the spread better runs the risk of losing not just his original outlay, but many multiples of it.
Experienced investors also warn that because oil prices tend to be highly volatile, the unwary spread better can watch hefty profits turn into massive losses in a matter of minutes.
"It's easy to place a bet, but it's just as easy to lose a great deal of money," said Alpesh Patel, a London-based private investor who has recently been betting that oil prices will fall.
Mr Patel says anyone contemplating a spread bet on oil must first understand historical oil price trends, and even then, should place only a moderate stake.
"The price can go against you, and it can go against you for a long time. You need to be quite clear about why you're placing a bet in the first place," he said.
Luckily, there is a safer alternative for would-be oil investors who lack the nerves of steel required for spread betting.
Oil price rallies are generally accompanied by steady gains in oil company stocks, and this one is no exception.
Anyone who bought BP shares at the start of the year would now be sitting on a 17% profit, and would probably have had far fewer sleepless nights.
Spread betting traders are moving long of the pound against the dollar once again, following last week's deeply disappointing non-farm payroll figures.
Financial Spreads said quite a few people had made money out of the dollar's recovery in the early part of last week, but were now positioning themselves for another run upwards by the pound towards its highs of 1.91.
Punters' view seems to be that the lack of job creation in the US makes an early interest rate rise from the Federal Reserve very unlikely, and that therefore the dollar is back as a sell.
As far as stock index betting is concerned, punters have continued to be bullish of the FTSE, looking for a more decisive break of the 4540 area, Finspreads said.
IG Index said however that sentiment on the Dow was bearish today.
Among individual stocks, IG said that Lloyds TSB, Jarvis and Bellway were all attracting buyers, with British Airways the only stock seeing significant shorting.
Tradindex said MMO2 and Abbey National had seen up-bets. Overall its balance of bullish orders against bearish orders was at 61:39 last week.
TradIndex is hoping to increase its market share in spread betting, with a souped-up spread betting platform, offering moveable stops and faster dealing times.
AN independent tribunal is to review the record £750,000 fine by the Financial Services Authority on controversial entrepreneur Paul 'The Plumber' Davidson.
The new hearing, on September 20, has been arranged after the decision of an earlier panel to step down after it emerged that the head of the tribunal, Terence Mowschenson QC, had been spoken to by Christopher Fitzgerald. He was chair of the committee that decided punishments for City wrongdoing and subsequently resigned.
Davidson is spending time at his Spanish villa - it reputedly takes ten minutes to walk from one end to the other.
He said he would attend the hearing, but added: 'I find it very odd that Terence Mowschenson, who excused himself from hearing the appeal, picked the members of the new tribunal.'
Davidson claimed the FSA's lawyers had warned him on the importance and far-reaching powers of the City regulator. 'I told them that if size was important, elephants would rule the world.'
Separately, it emerged that Davidson has settled a long running legal battle with City Index, the spread betting firm that was suing him for £900,000.
This followed a controversial £5m spread bet that Davidson allegedly made on the share price of Cyprotex, a small biotech firm that he was floating.
He said: 'We have settled with each other and we are big pals.' Davidson said he would have no hesitation placing further spread bets with City Index because 'they are the most honourable and pragmatic firm in the City'.
HALIFAX Share Dealing, one of the biggest stockbrokers, is to start offering contracts for difference (CFDs) to investors through a deal with City Index.
CFDs mirror the movement in share prices and enable investors to take a position without actually owning the underlying shares, making a profit or loss depending on the price movement over the period of the CFD.
City Index will provide the CFD dealing service, though it will be branded through Halifax Share Dealing, part of the HBoS banking group.
Spread betting companies have been warned by the Financial Services Authority* (FSA) to clean up their act to protect investors, or face heavy fines in the future.
In a letter to the industry, the FSA criticised firms for luring customers with hard-hitting promotions while failing to make the potential risks of spread betting* clear.
Originally, spread betting was the province of City professionals who would bet on the movement of financial markets and currencies. However, in recent years betting on sporting events has become widespread. The recent Euro 2004 soccer tournament is thought to have made spread betting companies millions of pounds.
But as it has become more popular the proportion of inexperienced consumers placing* bets has also risen. Figures show the number of people opening accounts is rising by around 20% a year, with around 80% of those being opened online.
The FSA is concerned that inexperienced investors may be using spread betting without fully understanding all the risks. These include people failing to realise they could end up paying far more than their original stake if the markets turn against them, or if the score in a football game is far higher or lower than expected, for example.
Firms that failed to warn customers that past performance had no bearing on future outcomes and those that buried risk warnings deep in the small print also came under fire.
Robin McIvor, spokesman for the FSA, said the letter was part of a process of 'beefing-up' of regulation of financial advertising and promotions.
'There are millions of new financial advertisements every year. Although the majority are not miseading, there are inevitably some that slip through the net* and we will be concentrating on these areas.'
McIvor denied that fears of a surge in betting once the Olympic Games start later this month had prompted the FSA's warning letter, but said it was a 'happy coincidence'.
In its letter the FSA calls on companies to assess the suitability of people for spread betting before actively targeting them with promotional and marketing literature.
The FSA confirmed it would be prepared to impose fines on companies that continued to flout regulations by misleading customers through financial promotions..
No part of this website (Financial-Spread-Betting.com™) may be copied or imitated in whole or in part. No logo, graphic, sound or image from this website may be copied or re-transmitted unless expressly permitted in writing by the webmaster.