How SBs can fiddle spikes. My theory.

yakatan · Jan 29, 2008

The explanation SB firms use, to counter allegations of price spikes to shake people out, is that it would be nonsensical as there would be traders on the other side that could take serious advantage, making a killing as the price will almost certainly move to its correct position and all at the expense of the SB firm.

This argument does not stand up to scrutiny at all. Why? Simply because countless times I've been told by these firms that erroneous spikes are not tradeable and countless of times I've read and, myself experienced, being stopped out on spikes. What does this all mean? It means that their computer software marks spikes as not tradeable to anyone who in the market already and in the money or trying to get a position to take advantage of the spike because it is data error:innocent: on the other hand their computer is primed to take out stops on these "untradeable" spikes for those already holding a position and are out of the money because they can quote you any price they want.

Basically spikes are tradeable if you are the SB firm but not tradeable if you are the client. Duplicitous affair.

Finspreads in their terms and condition, call their quotes Our Price

If they wanted to be honest they could have called it Our Price attached with a fair and clearly defined standard deviation from the real market price. If I was the FSA I would force this on them and also force on them an efficient ratio of servers to clients so they can never again say their servers were overwhelmed with requests. I bet most of them would close down.

It is probably OK to dabble in it as a hobby but it sounds like a mugs game if you try to use big money. They want your big money you can't have theirs.

Does anybody disagree??

trader_dante · Feb 5, 2008

yakatan said:
The explanation SB firms use, to counter allegations of price spikes to shake people out, is that it would be nonsensical as there would be traders on the other side that could take serious advantage, making a killing as the price will almost certainly move to its correct position and all at the expense of the SB firm.

This argument does not stand up to scrutiny at all. Why? Simply because countless times I've been told by these firms that erroneous spikes are not tradeable and countless of times I've read and, myself experienced, being stopped out on spikes. What does this all mean? It means that their computer software marks spikes as not tradeable to anyone who in the market already and in the money or trying to get a position to take advantage of the spike because it is data error:innocent: on the other hand their computer is primed to take out stops on these "untradeable" spikes for those already holding a position and are out of the money because they can quote you any price they want.

Basically spikes are tradeable if you are the SB firm but not tradeable if you are the client. Duplicitous affair.

Finspreads in their terms and condition, call their quotes Our Price If they wanted to be honest they could have called it Our Price attached with a fair and clearly defined standard deviation from the real market price. If I was the FSA I would force this on them and also force on them an efficient ratio of servers to clients so they can never again say their servers were overwhelmed with requests. I bet most of them would close down.

It is probably OK to dabble in it as a hobby but it sounds like a mugs game if you try to use big money. They want your big money you can't have theirs.

Does anybody disagree??

When a price spikes it is a result of data error it is NOT stop hunting.

Everyone is way too paranoid on here!

If you have been stopped out on an unfair price spike (at least 5 ticks or so above where the actual market was trading) and you are dealing with any kind of reputable firm then you should just ring them and ask them to check it. They will confirm it (often with Bloomberg prices) and if they are wrong they will re-open the trade.

That has always been my experience.

davidjonesig · Feb 6, 2008

trader_dante said:
When a price spikes it is a result of data error it is NOT stop hunting.

Everyone is way too paranoid on here!

What he said - completely agree. There are almost as many conspiracies about spread betting as there are about the moon landings.

Splitlink · Feb 6, 2008

davidjonesig said:
What he said - completely agree. There are almost as many conspiracies about spread betting as there are about the moon landings.

I agree, too, but

trader's should remember that the wheel that squeaks gets the grease.

By which I mean that for every trader, like TD, who rings them for an explanation, there are another five dozen who don't.

Do you think that those five dozen got their accounts corrected simply because they corrected TD's?

I don't believe that, but that is a fact of life outside of spreadbetting, too. How many times do the utility companies, banks, etc make "mistakes" in their favour?

You've got to keep an eye on things and ask questions when necessary.

Split

davidnmfarrell · Feb 15, 2008

I like your underlying point about Spreadbet firms having an interest in your money - always a concern! However I think that those people that do win big are so rare that the spreadbet firms make a packet anyway: I read a while back that CMC has been growing at 30% per year!

One approach maybe to use Spreadbetting to thoroughly test a trading system, then move to CFDs if it's feasible.

Of course the dream might be to create the equivalent of BetFair for spread betting - have a site that quotes prices and then match up traders to the companies willing to take on the spreads. The intermediary site would then take a small percentage of whoever profits from the trade. Is there anything like this out there?

David

How SBs can fiddle spikes. My theory.

yakatan

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trader_dante

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davidjonesig

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Splitlink

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davidnmfarrell

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