If you were S/B and had a STOP at those "fat finger" spikes they would be hit just the same. Do you honestly think that S/B companies are acting in your best interest and protecting you from price spikes? You gave up DMA because you didn't have a clue about what is what and what is not. Stop talking nonsense. DMA is professional and S/B is for kids betting pennies.
Agree with new_trader on this to an extent. If you had a stop in with an S/B company and there was a fat finger, you would be hit regardless. However, with an S/B company you can have a guaranteed stop - a luxury you certainly do not get in the direct market.
Also, S/B providers are a little "fairer" despite what people say. Take, for example, a fat finger in the market place. Lets say the price of the Bund goes down 300 points in a blip due to a fat finger. Now lets take two traders:
Trader A sees it blip down on S/B and buys it at the low.
Trader B is using direct market access and also sees it blip, acts instantaneously and buys it at the low.
The market rallies back 200 of the 300 points almost instantly and both traders close out for a quick 200 points profit. As soon as they do, the market then rallies another 100 points to where it was before the blip.
Then, as often happens, the exchange (Eurex in this case) takes action and cancels all trades that took place below a certain value (e.g. anyone that bought or sold within 175 ticks off the low gets their trades cancelled).
What is the outcome for the two traders?
Trader A with the S/B company gets his trade cancelled in all likelihood so he is flat. In some cases, if done at low size, he may even get to keep his profit, if the fat finger went under the radar.
Trader B, finds that because of the action by the exchange he is now actually 100 points offside on his position. That is because, his BUY was cancelled by the exchange but his SELL TO CLOSE wasn't. Therefore he finds himself net short and 100 points offside. And what's worse, whoever fat fingered short, has got to close to mitigate risk, so the market is now likely to rally hard as all the participants figure this and make the poor ******* pay up.
Just one of the dangers of direct market.
There are many others. Infact, there is a lot more danger than with an S/B company.
Just as a final aside - I don't agree with New_Traders post that spread betting is for kids playing with pennies. I am sure that for the most part it might be but it actually makes a lot of sense to use SB'ing if your style warrants it. If you are swing or position trading for example, I cannot work out why anyone would want to be in the direct market. The spreads are almost as narrow now on S/B and the lack of commissions and Tax for UK residents is a huge bonus, not to mention the guaranteed stops to save against overnight gapping in volatile markets etc.
I think that direct market is really only a must for scalpers or day traders that do a large number of round trips. Anyone else would be mad not to S/B in my opinion.
