Financial Spread Betting News

Spread betting firm Spreadex has beaten the odds by being named in the Sunday Times Pricewaterhouse Coopers Profit Track 100 for the third year in a row. The prestigious list compiles the UK's private companies with the fastest growing profits over the past three years.

And Hertfordshire-based Spreadex has been awarded 49th place in this year's chart which was published yesterday (April 20). Managing Director Jonathan Hufford said: “We are absolutely delighted to be featured in the Sunday Times list for a third year in succession.

“The achievement reflects the continued growth of the company and we have exciting plans to expand the business even further in the coming years.” Spreadex was originally formed in 2000 with a handful of staff but now has grown to around 100 employees.

In February the firm completed a £1.1m relocation to new offices in St Albans and last month achieved a new record number of bets placed. Mr Hufford added: “We are a financial trading company with most of our business based in and around the city. “Although the current economic climate is turbulent, the beauty of our product is that our customers are able to benefit from both rising and falling markets. “We have also pledged to hold our margin rates for our clients despite the effects of the recent credit crunch.”

Spreadex allows individuals to bet on financial markets or sporting events by offering a prediction or 'spread' on future outcomes. Clients, who think a particular outcome will be higher than the Spreadex prediction can 'buy' at the given quote while those who believe the outcome will be lower can 'sell'. A full explanation of the workings of the different markets and details on the latest prices available are online at the company's website Spreadex.

For further details please contact PR and Marketing manager Andy MacKenzie on 01727 895080 or andy.mackenzieATspreadex.com.

See the full Profit Track 100 list here: http://www.fasttrack.co.uk/fasttrack2002/bin/profittrack-supp-2008.pdf.

Dublin-based spread betting company WorldSpreads says it expects its sales and pre-tax profits for the year to the end of March to be significantly ahead of expectations.

The company says it has expended in a way which means that it has 'little or no reliance' on any small groups or large clients.

It says growth has been seen in its main offices in Dublin and London, with satisfactory growth in its international sales. WorldSpreads raised £5.77m (€8.6m) after floating on London's AIM stock market last year.

CMC Spreadbet deserve full credit for not increasing their margins when others all around them seized the opportunity to squeeze more paper from punters. They sent an email to this effect, and I quote:

Re - CMC Markets, I had this email a couple of days ago to clarrify margins are UNCHANGED:

'Dear Client

It's been a turbulent few days on the financial markets, with instruments across the board subjected to extraordinary movements thanks to the events in the property and banking sectors and the responses from central banks around the world.

At times of volatility, it's not uncommon for trading firms to raise their margins, passing this uncertainty on to their clients. We'd like to take this opportunity to remind you of our current margin requirements, which remain the same as they were before recent events and are now even more competitive. Of course in markets like these, it's always worth considering stop orders to manage your risk and keep on top of any potential losses.

CMC Markets offers margin rates of just 3 - 10% on UK350 and US Shares, download our Product List and see our current margins on the whole range of products offered by CMC Markets.

Spreadbetting is a leveraged product and carries a high degree of risk to your capital and it is possible to lose more than your initial investment. Only speculate with money you can afford to lose. These products may not be suitable for all investors, therefore ensure you fully understand the risks involved, and seek independent advice if necessary. Margin rates are subject to change and current rates are no guarantee of future rates.

If you have any queries regarding this e-mail please do not hesitate to contact the Helpdesk on +44 (0)20 7170 8205.

Thank you for your continued business,

The team at CMC Markets'

Cantor Spreadfair has announced that there has been a shift upwards in house price sentiment over the past few weeks.

Despite a melt down in the majority of world markets, the peer to peer spread betting exchange saw a higher level of activity on the exchange indicating a belief in a housing market rise. The market witnessed an all-time low in December 2007, but seems to be bouncing back with clients believing the housing crash is unlikely to occur.

Spreadfair clients were predicting that the average UK house price would decrease by the end of 2008, but in the last month they see the average UK house price to be three per cent higher by that date than their estimate two months ago.

Mike Ashley, the owner of Newcastle Football Club and controller of retailer Sports Direct, lost tens of millions of pounds last week after betting that HBOS shares would rise in the early months of this year, The Daily Telegraph reported, citing sources close to the situation.

Ashley, who was said to have placed the wager with spread betting group IG Index, was hit hard when shares in HBOS slumped on unfounded market rumours concerning the liquidity of the bank last week, the newspaper said.

Ashley's spokesman would not comment on reports that he was 129 mln stg out of pocket on the bet, the newspaper said.

Irish spread betting group World-spreads has opened offices in KualaLumpur, Malaysia as part of a EUR2m expansion in Asia. The company expects toemploy up to 20 staff at the new facility.

WorldSpreads newest offices are to be used initially to provide technicalsupport for its online trading system, which is designed to deliver spreadtrading services to clients in Ireland and overseas.

Due to exceptional market volatility we are making changes to our equity margining rates. We are taking this action to maintain a responsible margining policy in extreme market conditions.

These changes will be effective from 3rd April 2008. Any open position that you hold at this date, and any new position opened subsequently, will be subject to the new equity margin rates.

Full details of these new equity margin rates can be found below. Please note that these are our standard margin rates, and that concentration limits will continue to apply to standard rates in the same way that they do today.

Received the following letter from IG

In light of current market volatility, it has become necessary to review the deposit requirements on a number of markets.

It will usually be possible to reduce any deposit by placing stop losses on open positions. Please be advised that, should these changes create a shortfall on your account, it remains your obligation to fund the shortfall or reduce the size of your positions.

Markets continue to whistle around as we digest the latest Fed led rally in the States. Since mid January we have had five Fed initiative rallies (two liquidity injections and three rate cuts) which have all caused major moves to the upside on their respective announcements. In between times the direction has been, as you would expect, singularly grim. If we remove the Fed inspired rallies down days have outnumbers up by two to one since the turn of the year.

But oddly enough the net effect has not been as bad as one might have expected.

For all of the pain felt by many across the financial landscape the US markets are actually just 10% off (roughly) from the close at the end of 2007 and pretty much unchanged from the end of 2006. The FTSE, even though it has a heavier weighting of mining and petroleum stocks which might have been expected to help a bit, has actually performed worse since the end of 2007 but is also almost exactly where we started from at the back end of '06 .

Yes, the western world might be entering a period of slow or even negative growth but the equity markets have not (in the main) shown a great deal of evidence that investors are overly concerned. Even more, if you remove financial, building and retail stock from the equation (I know this is like removing housing and energy from inflation numbers) the markets have actually not done too badly. Obviously this is not what we would normally consider to be recessionary equity market activity. To date there has not been a 'broad' market retreat and it is this possibility which might now be worrying the various Treasury departments in the UK and the US.

Recently there have been one or two nasty little corporate numbers that are beginning to squeeze through into the headlines as companies which had geared up for growth or borrowed to hand back (!?) asset value to stock holders have suddenly run into very expensive rollover costs. It would be difficult to over estimate the damage done to various companies by those champions of the share holder registers the “active investors”. The financial engineering structures insisted on by these persons to realise a one-off pay out have invariably ended up destroying shareholder value and, it is likely, in some cases the actual existence of the companies involved. Weak boards who have kowtowed to the pressure will now be left exposed and we can expect some director shuffling in the coming months/years.

Markets

The FTSE managed to reverse the entire 200 point fall of Monday with a 200 point rally yesterday. This morning, after the US markets managed to climb through out the evening session, we are opening 35 higher at around 5640. To be honest our clients are having none of it and are busily selling into the move. This could prove to be a dangerous strategy as, even in bear market conditions, we can have nasty little spikes higher.

With so many people now negative just such a prolonged bear squeeze could be on the horizon.

The dollar which had managed a bit of a rally yesterday on the Fed announcement is giving it all back again this morning. This is causing a bit of a move higher again in Gold as the yellow metal strives to recover from the vicious sell off over the past two days. Highs to lows in Gold from Monday morning to yesterday evening were some $60 and we can anticipate that there were some nasty hangovers from weak buyers who were coming in late to the commodities party. Two of our biggest Gold bulls actually sold out of their very long term positions on Monday morning (wish I had followed them!) realising massive profits. No doubt they will be back in at some point but even the drop to 975 last night did not tempt.

Oddly enough if we were coming in to work this morning having fallen asleep on Friday night we might be asking what all the fuss was about. Nearly everything (aside from the fact that we have one less bank on the planet) is at the same levels as Friday's close. This is what we need, a period of consolidation around stable levels. Unfortunately the chances of it happening seem very slim.

A statement indicated that it had been caught up in the recent Global Trader affair:

"It is with regret that FuturesBetting.com has had to take this action; however it is the priority and responsibility of the firm, as a regulated entity, to protect client funds. The reason for the decision to require all clients to close their positions is because the Company can no longer meet its capital adequacy requirements. Unfortunately FuturesBetting.com has been caught up in the financial crisis of Global Trader Europe and a significant proportion of the company's resources have been 'frozen' along with that of all of Global Trader Europe's other clients."

"We have informed the Gibraltar Regulator of the situation and have agreed that the Company will cease trading with immediate effect."

Clients were being asked to close their positions by end of trading on Friday.

The latest advertising slogan from City Index is “Take a new position by the pool.” The company has started rewarding regular spread betting customers with free Airmiles.

Until recently many spread betting firms, including City Index, had offered up-front cash incentives in a bid to bump up customer numbers and draw in those new to spread betting.

But following a period of strong growth in account openings, some firms have ended these one-off deals and introduced offers that benefit existing as well as new customers.

Providers that offered cash incentives - like a free initial £100 ($203) credited to each spread betting account - found that a proportion of customers were opening accounts just to capitalise . Some opened several accounts and showed little loyalty to any provider.

Betting companies are keen to attract those who have not spread bet before rather than those who hold accounts elsewhere and are after the latest offer. They want to build longer term relationships and so offer on-going incentives.

“Cash offers have worked well for us in the past, but as the market matures we're focusing on rewards that are attractive to traders,” says Alexis Webster, commercial development director at City Index.

City's new scheme, launched last month, gives traders 1,000 Airmiles when they sign up and up to another 20 with every qualifying trade. Account holders also receive 500 bonus miles if they refer a friend.

There is no limit on the number of miles earned. Mr Webster says the scheme is intended to attract experienced traders who have not yet traded with City Index.

CMC Markets, another betting provider, has also pulled back from cash incentives.

“We've offered these in the past as a way to get more people interested in us,” says Gary Thompson, head of sales trading. “But now we are focusing more on providing education about financial markets.”

The group says cash incentives can attract people who do not plan to become frequent traders.

“No one wants a client for just three weeks,” says Mr Thompson. “We are focusing more on retaining clients.”

CMC now offers a free day's training when clients open a spread betting account. It offers courses with information on how to spread bet, the financial markets and technical analysis. New customers also receive free educational DVDs.

As well as trying to appeal to less experienced traders, CMC has a reward scheme for high-end clients offering the chance to earn luxury experiences, such as time on a private jet.

“We want to encapsulate the whole market and provide benefits for new and experienced traders,” says Mr Thompson. “High-end clients want to be looked after, while educational courses bring in new people.”

SpreadEx offers new customers free bets - financial or sporting - after they place a certain number.

Once a new customer has opened an account and placed five qualifying financial bets on the FTSE-100, they receive a free £10 bet that they can place on the FTSE. Alternatively they can choose two free sports bets.

Some betting providers still offer free money to customers. Capital Spreads gives clients £100 if they recommend a friend, and £100 to the new customer.

Simon Denham, managing director, says the scheme, launched over a year ago, has been “moderately successful” in attracting new customers. But he does not believe cash incentives explain the rapid growth of spread betting.

“More people are interested in spread betting as a result of what's happening in the news and because they are becoming more familiar with market movements,” he says. “Spread betting offers a cheap and flexible route into trading and the cash offers ... are just a little bonus, not a reason to get involved.”

Any free offer is likely to carry conditions designed to encourage new customers to keep on betting. These could be tie-in periods or minimum deposit requirements.

Mr Denham says no matter how attractive the initial deal, it pays to shop around.

“You've got to explore a little deeper before jumping in,” he says.

“The real benefit to a new customer is the dealing platform, customer support and above all the cost of the spread.”

Clients of Global Trader Europe (GTE) say they have received a cold response from the company after it ran into capital difficulties earlier this month. A group of clients have started a website - http://www.globaltraderclients.com/ - where they have a platform to share information and club together.

Clients, who have been in contact with Moneyweb, say they have not received an apology from GTE or any assurance that their money is safe.

Global Trader CEO Charles Savage counters that he can understand clients' frustration, but says the administration process restricts him from making comments to clients. He asks clients to give the administrators time to evaluate the business before they can issue a statement regarding funds that clients can "hang their hats on".

GTE was placed into administration earlier this month after one of its clients incurred trading losses that he wasn't able to cover. As a result of the losses, a shortfall developed in GTE's minimum capital, as required by UK regulations. Under the administration process, clients are unable to open new trades or withdraw funds.

GTE is a division of Global Trader, which in turn is a subsidiary of JSE-listed Purple Capital (JSE:PPE). Purple Capital shares set a new 12-month low on Thursday. They have fallen 44% in the past two months.

Global Trader insists that local clients have nothing to worry about and that the business is "highly profitable". Global Trader pioneered contracts for difference (CFDs) in South Africa, and its business here accounts for over 80% of the group's profits.

But some UK clients ask if Global Trader South Africa is so robust, why it or Purple Capital didn't step in to cover the capital deficit at GTE.

Savage is quoted of saying that if Global Trader could have stepped in, it would have. The losses were simply too large for the parent to cover.

UK clients also complain that communication from GTE and the administrators, Smith and Williamson, has been poor. After the troubles arose, they received three e-mails: one from Global Trader informing them of the client's default, and two from GTE's administrators.

Savage asks clients to give the administrators time to follow the process. He says they are very reputable, and that the administration process is very clearly defined in the UK.

"They have been in control for just over a week," says Savage. "They need time to get comfortable with the facts." He stresses that they are protecting clients' interests.

Savage says he is in daily communication with the administrators and is giving them information. He is also trying to find an angel investor to bail out the business.

Meanwhile, the Financial Times of London reports that GTE's administrators are moving to recover assets of the troubled client. It reported Tuesday that an exclusive £16m residency on one of London's most sought-after streets is set to come under the control of GTE's administrators.

The defaulting client is rumoured to be Cold Investments, a company with links to colourful businessman Robert Bonnier. What is known is that the client incurred losses by betting on two technology shares: Artilium and SCI Entertainment Group.

Global Trader has admitted that the trades would not have been allowed under new risk control measures that were introduced after it was acquired by Purple Capital last year.

An extra-safe spread-betting account for beginners called 'Discover' has just been launched by ODL Securities. Traders get a guaranteed stop-loss order at no extra cost and can't gear up positions, which hugely reduces the risks involved. The firm is also offering two other accounts aimed at more sophisticated spread bettors. The 'Explore' account is a more intermediate level product, allowing more risks. And management says it hopes to attract top-end punters with the personalised service offered on with its 'Frontier' account.

Cantor Spreadfair has confirmed that through its suspended share markets it is offering its clients the opportunity to bet on the level of compensation Northern Rock shareholders will receive per share as a result of the independent valuation process.

The current price available on Spreadfair is 25p-35p, with the price expected to narrow as clients introduce liquidity to the market.

When a company's listing is suspended, shares in that company can't be bought or sold until the suspension is lifted or other arrangements made. Cantor Spreadfair's suspended share markets allow shareholders to hedge their shareholdings during the period of suspension, as well as allowing those who want merely to speculate on the share price following the suspension to do so.

Cantor Spreadfair is a person to person spread betting exchange where clients are able to post a price at which they are prepared to trade or accept a price that has already been posted by another client. Spreadfair's clients will therefore be able to determine their own valuation of Northern Rock's share price via their open order book. Previously, the only alternative open to clients wishing to trade on suspended shares was through the OTC market or through market makers, often inaccessible to the retail investor.

As a peer to peer exchange, the spreads are generally much tighter than the spreads offered by the traditional spread betting companies. Commission is charged on the net winnings. Profits made from spread-betting are exempt from capital gains tax.

I'll begin this commemorative Northern Rock Nationalisation Diary, with a tale from my favourite bear trader, Simon Cawkwell.

Cawkwell, a trained accountant, is one of the London's most colourful and long-standing short sellers. Better known as Evil Knievil, on account of his daring stock market gambles Cawkwell made his name shorting Robert Maxwell's Maxwell Communication Corporation and Polly Peck International. But his latest play was Northern Rock

He warned in November that the Rock's shares would be worth 5p and that the bank's woes represented the "greatest shorting opportunity" he'd ever seen - something that's making him look like a bit of a clever clogs now.

Cawkwell took his own advice, and booked his usual £1m profit, but I learn that he could have won more.

"Through an oversight on my part, I have had to incur a tax liability of £300,000 on the Northern Rock haul," he admits.

That seems odd, as spread betting is tax free, but apparently the usual bookies couldn't take large enough punts, so Cawkwell put part of his bet through agency brokers and incurred the tax.

So there's another financial triumph getting clobbered by the Revenue. It's a parable of our time.

Peter Cruddas, the City of London's richest man, has appointed two new directors to the board of CMC Markets, the financial spread-betting business in which he controls a majority stake.

Mr Cruddas, who in December sold a 10pc stake to Goldman Sachs for about £140m, has made the non-executive appointments in a bid to bolster CMC's board.

But Mr Cruddas - who has a personal fortune in excess of £1bn - is ruling out a stock market float for now, instead preferring to grow the business with the help of the money invested by Goldman.

CMC's new directors are Goldman's Jan Boomaars and Simon Waugh, the founder of Propertyworld.com.

London-based Mr Boomaars was elevated into Goldman's exclusive partnership in October 2006 and works as a managing director in equity derivatives.

Mr Waugh replaces Jim Pettigrew, the former finance director of inter-dealer ICAP, who became CMC's chief executive last year.

However, Mr Cruddas, who remains CMC's executive chairman, says the appointments are not intended as a pre-cursor to a stock market listing.

CMC had planned to float last May with a price tag of about £700m, but the listing was pulled at the 11th-hour because of market volatility.

He said: "We do not have any plans to float", adding that his focus is to grow the business, which he says is expanding in excess of 40pc a year.

The business now has offices in Singapore and Auckland and Edinburgh, and will open its first in Ireland in Dublin later this month. That will take the total number of offices to 23, with another six planned over the next 18 months.

In the year to end March 2007, CMC doubled pre-tax profits from £10m to £21m, made an operating profit of £19.9m on sales 45.9pc higher at £110.5m in the year to March 2007. However, group profits for the current year - to March 2008 - are expected to be higher, in the region of £70-75m.

Two months in, Mr Cruddas said the relationship with Goldman was "working really well". "It's great to have them on board as they are helping us with all sorts of issues."

Part of the rationale for the Goldman investment was to transform CMC into a global business with considerable scale.

In January, CMC acquired Australian broking firm Andrew West, which followed on from its purchase of online financial information site DigitalLook last year.Given the speed of CMC's growth, Mr Cruddas added: "We need to continually strengthen our board and management."

Global Trader, the online spread trading company, has been forced to close its doors to new business after intervention from the Financial Services Authority.

The move followed heavy losses sustained by clients trading equity derivatives in Artilium, an Aim-listed telecommunications technology group popular with retail investors.

Artilium shares have plunged in the last few months in spite of a lack of news flow in the company. From a peak in October, the stock has dropped 86 per cent, leaving the company valued at just £30m.

Global Trader is a specialist in spread betting and contracts-for-difference (CFD), a type of equity derivative that allows investors to gain exposure to a share, often with a relatively small down payment. The company confirmed last night that it had applied for a 'variation of permission', the official method by which companies change the terms of their authorisation.

It is understood the FSA requested the move, which means Global Trader will no longer be permitted to carry out regulated activities except to close existing trades. The regulator would have had authority to force through the variation of permissions if it had wished.

Global Trader said: 'Throughout the process, we have been communicating to our clients and taking every permissible action to protect the value of their investments.'

A full statement is expected to be issued today to the Johannesburg Stock Exchange, where Global Trader's parent company Purple Capital is listed. According to its website, Global Trader conducts more than 600,000 trades a year, worth in excess of $10bn per annum.

The group has offices in London, Johannesburg, Cape Town, Toronto and Bangkok and a presence in Singapore, Moscow and Vancouver.

Until recently, Global Trader was run by Fleur Gremmen, a former JPMorgan investment banker who helped found the business in 2000. The company was bought last year by Purple Capital, a South Africa-based financial services group headed by Mark Barnes, executive chairman. Purple Capital owns stakes in a host of South African companies including Integer, Blackstar Investors, African Independent Finance and Spanjaard.

CFDs have been at the forefront of the booming equity derivatives market because they are highly liquid and often more tax-efficient.

Here are more victims of the credit crunch. Financial bookie Cantor Index is withdrawing credit facilities from users of its Spreadfair betting exchange, just a couple of months after doing the same to its high-rolling spread-betting punters.

The facilities will be abruptly pulled by the end of the month and co-managing director Andrew Garrood tells clients: "Please ensure that your Speadfair account contains sufficient funds to satisfy any unrealised losses in respect of all your open bets, and that any outstanding realised losses are paid in full."

That's not going down brilliantly with the Spreadfair punters I've spoken to - most of whom play for low stakes. When the bookie withdrew credit from its high-rollers, plenty of them simply defected to rival services.

Still, it seems that Cantor is motivated solely by altruism.

"Things are so volatile at the moment that we don't want clients getting into debt," explains a spokesman.

How reassuring.

New research shows people in the UK are still keen to invest despite economic turmoil and some are even benefiting.

ODL Markets (ODL), the financial brokerage who is set to launch a new spread betting service this week, found that 33% of people will be actively looking to make more from their investment in 2008. Despite the accusations of the UK as a frivolous nation, almost 75% are regularly saving every month.

ODL also found that 33% would actively be looking for the most tax-efficient way of making the most of their spare cash, 37% invested a fixed amount, with a further 34% setting aside spare cash every month.

A quarter of respondents invested over 20% of their spare cash each month, almost 45% felt that buying property was a good short to medium term investment and a tenth of respondents were not aware that tax was payable on profits from selling an investment property, interest gained from money in a deposit account or from share dealings or dividends.

Over one in four people surveyed would take calculated risks and, given the hypothetical scenario of being given £10,000, over half said they would risk at least a quarter of the amount to try and double their money. However, with £500, only one in ten would invest any of it.

James Parker, head of spread betting at ODL markets, said: 'Even though people are still keen to invest or speculate, generally they are not aware of the full range of financial tools at their disposal.'

He added: 'Even in today's economic climate, people are still happy to take financial risks if they think the rewards will be high enough.'

LONDON, Feb. 6 /CNW/ - City Index, a leading provider of retail derivative trading services including CFDs, FX and spread betting, is pleased to announce the acquisition of FX Solutions LLC (http://www.fxsolutions.com) in an all equity transaction.

FX Solutions, based in Saddle River, New Jersey, provides a premier retail foreign exchange ('FX') electronic trading platform for all major currency pairs. FX Solutions was founded in 2001 by Thomas Plaut and Robert Cortright, two industry leading executives with over 40 years combined experience in foreign exchange trading. Messrs Plaut and Cortright will continue in central roles in the enlarged group.

FX Solutions has been recognized for 3 consecutive years by Inc. magazine as a part of the annual Inc. 500 "America's Fastest Growing Private Companies" list. Only 11 of 500 companies achieved that status, and in 2007, FX Solutions was the only retail FX broker to make the list.

Between December 2005 and December 2007 FX Sol's EBITDA (earnings before interest, taxation, depreciation and amortisation) grew at cumulative annual rate of over 60 per cent. In early 2007 Francisco Partners, the US private equity house, invested over US$100 million in FX Solutions.

The combined Group will employ over 400 staff across 6 offices in the UK, United States, China, Singapore and Australia and has partnership relationships throughout Europe, North America, Australia and the Middle East, transacting approximately 1.6 million trades per month. The Group is regulated in Europe, the United States, Singapore and Australia.

Mr Clive Cooke, CEO City Index, commented on the transaction: "The FX Solutions team have built a highly successful business with clients in over 50 countries and we are delighted to be able to bring our two companies together.

This transaction will enhance and strengthen our current product offerings to our retail clients and institutional business partners and accelerate our expansion into new geographical markets."

Thomas Plaut Co-founder and Co-CEO of FX Solutions, commented: "We are very pleased to be joining the City Index Group, an ideal partner to take our business to the next stage. City Index's diverse and worldwide operations will open new opportunities for our business and we know the merger with City Index is going to be a positive for all involved - especially our customers."

"We are delighted to be participating in this combination, which creates a new, multi-product leader with best in class technology, serving a rapidly growing, global market," said David Golob, Partner with Francisco Partners.

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