Spreadbetting 'error' on Financial Markets

turbobob

tradetime wrote: »

I really have no idea, not something I have had cause to consider. I would assume they run some sort of pricing model that takes into account the Globex overnight session on US futures, and the Asian markets, but as said, I really have no idea.

My guess would be an algorithm based on US futures, Asian markets, and where punters have their stops

Stebiz, will be interested to see how the complaint turns out.

tradetime

turbobob wrote: »

My guess would be an algorithm based on US futures, Asian markets, and where punters have their stops

Stebiz, will be interested to see how the complaint turns out.

LOL like I say, when 80% of your punters lose, and you can hedge the rest, why make things complicated. I have from time to time compared the prices quoted on a spreadbet firm with the real market, and I find no significant anomalies with that particular firm, but it has only been a small sampling.

Think of it this way, since the majority of short term traders lose money, then it follows that in order to succeed you would have to be doing something different than the majority, ie; you have to be on the other side of their trades. Now imagine I am the SB company and you are one of my clients, and let's say you are consistently profitable, in other words, more often than not you will be amongst the 20% on the right side of the market. In order to shaft you by moving prices against you, I have to move prices in favor of the 80% on the wrong side, not very logical.
Most of the stories about alleged tricks by SB companies that I have heard, tend to revolve around people trying to use them to scalp small movements in price. SB companies in the main openly do not approve of this and will cause you problems.

tradetime

May I ask which SB company this is?
Have they corrected the price on their charts, ie what does Sundays FTSE low show now?

stebiz

It was Tradefair, and in my opinion they didn't 'Tradefair'. I have used IG Index before, with no problems. In relation to a couple of comments about 80% losing on this type of spread. I do agree, short term punting in the whole is very risky business. I have done okay over the years, but also had days when I have done very bad. I don't tend to trade too much on the daily markets these days. Only if I have a gut feeling.

tradetime

Thanx, always interested to know what firms are involved in anything questionable. The 80 : 20 split is a widely accepted approximation of short term trading in the regular markets from numerous studies carried out over the years, I believe I read somewhere that SB firms show similar results.
I predominantly trade on the futures markets, and also etf's and options, but keep meaning to take a more serious look at spreadbetting.

tradetime

I believe I read somewhere that SB firms show similar results.

Found that particular quote.
http://www.financial-spread-betting.com/Segregation.html

stebiz

tradetime wrote: »

Found that particular quote.
http://www.financial-spread-betting.com/Segregation.html

Interesting read. Thanks

property.advert

I don't see why people continue with spread betting as you cannot offset losses against profits, though profits are non taxable I agree. Much better to run CFDs I think and as you become more experienced you'll be looking at futures. With funding rates so low, the CFD funding cost versus equity stamp duty costs has rarely been longer. Much more transparent as well.

Moss10

[FONT=&quot]Hi Stebiz,

I had the same problem with Tradefair on Monday 10/5/10 at around 1:00am. They took all my trade profits and made their own trades (or put my trades back as they say) on my account when they felt like it (making me a huge loss). It is good to know that somebody is in the same position as me! They should just nullify the FTSE trades that happened or were happening at that time!!! I have also made a complaint to them and their 'compliance officer'. No reply as of yet.

I look forward to hearing the outcome of your complaint and please keep us updated.[/FONT]

tradetime

As mentioned earlier, SB companies are regulated by the FSA, thus you have recourse for further action if you have followed the appropriate "in house" procedures and feel your issue has not been resolved in a satisfactory and fair manner. It is difficult to comment as a casual observer but it seems that the most appropriate way for the SB firm to treat this from here, is to void the original trades thereby leaving their clients not out of pocket for what appears to be their error.
Regular market exchanges can and do void trades where excessive pricing error is felt to have occurred, this was most recently seen during the so called "flash crash" a couple of weeks ago. But "excessive" in Nasdaq / NYSE means pricing error in excess of about 60% away from where it is deemed it should be.
Personally my advice to anyone selecting a SB company is to stick with the larger established companies, preferably one that is involved in other more conventional aspects of financial markets, and one that has a reputation to protect. You may not get the tightest spreads, and it won't mean that every dispute is resolved in your favor, but in my experience companies with established reputations, whatever sphere they operate in, (assuming they are good reputations of course) tend to look to protect that reputation and will often move quickly to resolve minor issues that could damage that reputation.