FCA concerns on Spreadbetting

This is a discussion on FCA concerns on Spreadbetting within the Spread Betting & CFDs forums, part of the Commercial category; Spread betting used to be pitched as tax free to attract people. Why else would you trade through a broker ...

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Old Dec 7, 2016, 10:07am   #9
Joined Jul 2008
Spread betting used to be pitched as tax free to attract people. Why else would you trade through a broker that is ultimately on the other side of your trade. The problem is it is only tax free if you do it for fun and not in a professional capacity. If you don't believe me then read the following statement taken from HMRC's site

‘To be taxable, the spread betting wins must come not merely from an opportunity presented by a trade, they must arise from the carrying on of that trade. Whether or not a particular spread bet is taxable will depend on the terms of the contract and the economic substance of what is done.’

Tax free used to be the sale pitch but is no longer the case. Since that benefit has been removed for any trader making money consistently, why would you trade with them since they are taking the other side of your trades?


Regulation for spread betting companies is slightly different than your traditional broker. As an example they are required to offer a fair and accurate reflection of market which doesn't apply to traditional brokers. For most people the trading process is seamless because they are in one of 2 books at the firm. The first book is for traders categorized as "going to fail". If you are in this book your orders will be filled with no re-quotes outside a fast moving market.

If you are successful on a consistent basis then you will be in a different book. Traders in this book have their orders routed to a dealer. Why does this happen? well they are taking the other side of your trade and if you are constantly winning then they are losing. So they need to either directly hedge you (if its a large trade) or pool positions and hedge the pool. The difference contrasted with a traditional broker is execution speed and re-quotes. Why any trader making money consistently wouldn't want to use a broker where their trading process is less seamless than a traditional broker is obvious.

As for them being trustworthy and operating within FSA rules (i spent 2 minutes and found these. Imagine what i would find if i spend a day researching)


- CMC hit with record £850,000 fine for ‘flagrant breach’ of regulation

- CMC ordered to repay clients after complaints about charges (the firm admits as part of its defence that the platform was unable to provide accurate quotes)

- The Financial Conduct Authority fines FXCM UK £4 million for making ‘unfair profits’ and not being open with the FCA

- IG accused of prioritising own trades during Swiss franc frenzy

Last edited by forker; Dec 7, 2016 at 11:28am.
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Old Dec 7, 2016, 12:27pm   #10
Joined Jul 2008
peakoil started this thread @forker, with respect, this thread is more to do with the FCA's recent proposals regarding both spreadbetting and CFD's, as opposed to a debate solely on the merits of spreadbetting itself; Much as that debate too, may well continue on and on...

Nevertheless (& to respond to you briefly) almost all of us know already that to be entitled to the full benefits of spreadbetting, it must not be your only income. For those who wish to trade full time and have no other source of income, then of course they should seek the alternative route to market. In that regard, the issues you raise are fair enough.

Secondly, (The Swiss Franc debacle notwithstanding, given that it was an extremely rare 'Black Swan' event - which caught everyone off guard - not just the spreadbet/CFD community) it's a present day myth that everyone on 'A Book' has their trades delayed - just because they may also be hedged on the underlying market. The evidence remains (as you should well know from being around long enough) that those who are at all likely to suffer the effects of dealer intervention, are those who are seeking to profit *solely*/repeatedly from scalping, arbing and/or pricing inefficiencies. For at least the past decade, as ffsear reminds us, owing to the positive effect of great competition within the market, anyone who wishes to play a fair game, will find that execution speed is not compromised, regardless of where they are classed in the book.

Mistakes were definitely made in the past, but that they've been the foundation for both change and progress within the industry, is surely a good thing, when all is said and done. Consider, for instance, the relative quietness of this forum of late, which is testament, in itself, to these facts.

As for the topic of this thread, I thought Splitlink's quote was so apposite, that it's worth repeating now:

"If we can let people vote for a Brexit and other referendums on a whim, because it is their right to do so, then those same people should not need protection when spreadbetting."

What's more, no matter in what field of life you care to examine, whenever 'success' is up for grabs - the losers are many, and the winners will be few.
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Old Dec 7, 2016, 12:34pm   #11
Joined Jul 2008
Quote:
Originally Posted by peakoil View Post
it must not be your only income. For those who wish to trade full time and have no other source of income, then of course they should seek the alternative route to market.
What part of the HMRC rule don't you understand? forget it i am talking to morons
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Old Dec 7, 2016, 1:02pm   #12
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peakoil started this thread @ forker Obviously, and on the contrary, you've misunderstood what I've written. Having said that, as your contributions are going in a direction which is less than inspiring, I trust few would miss you on this thread. IOW, this poster sincerely hopes that you put your talents to use elsewhere on the forum.
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Thanks! The following members like this post: Lee Shepherd
Old Dec 7, 2016, 2:17pm   #13
Joined Feb 2002
The advertised tax-free aspect of SB is true but has always been a red herring.

Very few SB customers have ever made sufficient SB profit for this to be of interest. In any case, taxation on Sb profits might not be all negative. My then accountant assured me long ago that if I ever made consistently high profits from any forms of trading he would try hard to convince HMRC to teat me as self-employed, with this as sole income, and it would be financially to my benefit. But he also said HMRC had rejected multiple such applications from full-time traders so it was an unlikely outcome.
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Old Dec 7, 2016, 9:49pm   #14
Joined Dec 2004
Some controls are overdue but the Spreadbet companies can get round this by getting newbies to sign disclaimers on how much they can lose. Also the accounts shutdown if a newbie say loses £1000 or agreed pre-set level in a month. They should also restrict mobile access to newbies unless they opened the position on PC.
Finally the Spreadbet companies can always lean on the Tory government since I believe they are quite large donors.
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Old Dec 9, 2016, 12:35pm   #15
Joined Dec 2011
As traders’, what's the general consensus on using leverage?
Without leverage, of at least 1%, will you start looking for alternative investment products, if so are there any available?
Is there anything you think the regulator should do apart from raising margin to accommodate you and keep CFD trading as it is?

Please share your viewpoints as we are compiling the data for when we respond to the FCA, i personally want consumers to have the choice and if they feel comfortable with higher or lower leverage then they should be able to make that choice, indeed for newer traders that may not be accustomed to the notion of leverage then limitations are practical, but one bad apple should spoil the party for us all.
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Old Dec 10, 2016, 5:13pm   #16
Joined Mar 2003
All accounts should be limited risk unless one is a professional client - this is in itself a problem because a provider could in theory easily get the client to agree (tick) that he's a professional client.

No one should lose more than the amount on his account - this would make providers think more carefully and be more responsible with leverage and margins. No one should be sued by a CFD provider because he lost a lot more than was in his account. All these stories about people who lost a lot from Black Swan events only tarnish the industry as they end up published in the media. And trading should not be gamified - some of those providers hide fees so its difficult to figure out exactly how much you are getting charged.

Lastly, these are specialised products not appropriate to advertise on the mass media - so no TV Ads and no football sponsorships.

Last edited by luckystrike23; Dec 11, 2016 at 2:05pm.
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