On CFD's, spreadbetting and horse racing

K

Kicking

I am currently in the UK and people here trade things like CFD's and spreadbets. Even though I don't really consider using these products I had a look at some of the firms who offer them (Cityindex,Cantorindex,GCI,Deal4Free,they all have their TAnalysts on CNBC every other day! ). So far it looks a bit like a sucker's game to me, my understanding is you can only deal with the house(kinda like bucket shops, it sure stinks) . Out of curiosity, I would like to know more about how these products are designed,how they work and how close they (should) track the underlying.

Also sports betting seems pretty big here and I happen to have the "racing channel" . I remember reading this article on LBR website about betting the horses and trading, can you really make money consistently in horse racing ? I also heard the game was rigged in the UK (some story on BBC about bookmakers paying jockeys).

Anyway I 'd like to read your thoughts...
 
CFD's is a way of trading the underlying shares on a margin, and avoiding the .5% stamp duty (tax) on every share purchase. They tend to be priced around the spread of the underlying, and as such are not very efficient all. Not wonderful, but neither are the stock futures. Much better than the spread bets though.

Spread bets are much less efficient and basically the house is making a market all of their own. They skew the prices in their favour and apply unreasonable spreads consistently. Even against the futures it makes a tough business much tougher. Some quote smaller spreads, but sit on orders to skew the price against you and create an artificial spread which is much larger. Not worth the effort. Basically their apporach is to chew up clients funds and move on to the next. All the spread bet firms are really starting to hurt badly now, and have some nasty little tricks up their sleeves to try and squeeze profits out of people.

hope this helps

Natalie
 
An English girl with a French name? and you trade ...
How can spreadbetting be legal ? From what you are telling me these firms operate like bucket shops .
 
Quote from Kicking:

An English girl with a French name? and you trade ...
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Guilty as charged... :)


How can spreadbetting be legal ? From what you are telling me these firms operate like bucket shops .
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That's pretty much what they are. It grew up from sports betting, and they expanded into a vacant market...

Isn't it an interesting society we live in that has a government that while encouraging people to provide for themselves by 'investing/saving' money for their futures instead of relying on the state, and sponsoring an organisation whose sole raison d'etre is to promote wider share ownership, approves some products that are so complicated that no-one will ever understand them, others that border on the dishonest and taxes the hell out of any savings/'investments' that are made anyway, encourages share ownership, but taxes you for buying them in the first place, and so creates a market for various types of instrument designed to get around the problems created by the government (under the auspices of trying to protect the investor - now that's a laugh too!!!). Then it allows these product providers to get away with absolute murder.

With a regulator (sponsored by the government) that can and will jump all over the avarage fund manager if they get it wrong (but have done nothing dishonest) for almost anything, but allows other companies to blatantly manipulate pricing consistently in their favour. Allows a virtual cartel to operate instead of healthy competition, and doesn't seem in the least worried that between the tax and the astronomical charges, they are doing the precise opposite of their stated intention...

I wonder who is paying who to keep it that way. No complaints from me - I don't bother playing in that market - it's not worth it - but just a reflection of our times :)

Natalie
 
kicking,

meet British spread-betters at www.trade2win.co.uk

they´re so mad about saving taxes that they seem to forget about the basics ... it takes profits first to save stamp-duties, doesn´t it ?

regards

wild
 
Quote from wild:

kicking,

meet British spread-betters at www.trade2win.co.uk

they´re so mad about saving taxes that they seem to forget about the basics ... it takes profits first to save stamp-duties, doesn´t it ?

regards

wild
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Agreed Wild. In fact, most of the spread bet companies even sponsor exhibitions and conventions and things just to keep you giving them money. here is a good example of the wonderful pricing they offer.

invensys bid/ask 56/57

hmmmmm - I make that close to 2% spread??... and that's before they skew it some more... (And the page that was on also had an advert to invite you to a conference where they can tell you how to make money out of buying and selling through them - code for how you can make them money doing it more like...)

Makes you wonder doesn't it :)

Hey - here's a thought. Why knock youself out trading and taking on risk, when you can get others to do that and just take their money in spread manipulation - start a spread bet company... :D On second thoughts maybe not...


Natalie
 
i'll be the first to admit that i KNOW NOTHING about spread betting other than what i have read on this thread. BUT it seems very very anachronistic. why don't the brits just trade directly in the US markets via the internet ? at first glance, spread betting seems to be something that would have occured before the widespread and ( cheap ) acccess to markets via the net. bucket shops only operated in the US when market data was difficult to obtain. something is quite messed up on the mother island.



:(
 
Quote from marketsurfer:

i'll be the first to admit that i KNOW NOTHING about spread betting other than what i have read on this thread. BUT it seems very very anachronistic. why don't the brits just trade directly in the US markets via the internet ?
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Some of us do exactly that. mind you, we have had quite a few problems gaining access, and it has tended to be fairly explensive access too. Also, US brokers don't really advertise over here, and many don't accept Uk clients either. Access to information here is still primitive and dominated by a number of poor quality providers. The last 5 years has seen a lot of improvement in that, but it is way behind the US. Those of us lucky enough to know, get almost all our services from the US...


at first glance, spread betting seems to be something that would have occured before the widespread and ( cheap ) acccess to markets via the net. bucket shops only operated in the US when market data was difficult to obtain. something is quite messed up on the mother island.
:(
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Yes - They have been for a very long time indeed and are getting worse not better...

For example Mr J Bloggs owns 200 privatisation share valued at about £300 that he bought years ago when the government was selling off all the companies they had previously nationalised. he goes to his broker to sell them and gets his price. He pays his fees and a week later gets his money (if he is lucky) settlement can take a week and it takes 5 days to transfer the money to his bank account...) After all the deductions he gets usually about £285 for his shares valued at £300...

It does get better with size, but not that much unless you are an institution with size to match in which case it is a very different playing field...

Natalie
 
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