A market maker of course creates their own synthetic market, yes the prices reflect the underlying but your not actually trading in the 'real' market, your trading against CMC in their own fictitious market that they create (hence they profit from client losses)! The pricing has absolutely nothing to do with whether what your trading is the 'real' market or a synthetic market, the matter of fact is CMC create their own market! Think your the one who needs to go do some research :cheesy:
I think all Gle was trying to point out here was that although the spread betting companies are market makers, they are basing their price on an underlying product, so they are not just fabricating the market out of thin air.
Ie they’re not saying guess how many fingers I’m holding up, here’s a market 0-10, and whatever number you say, they can change it. No one would bet/trade with them if that was the case. The existence of an underlying product provides you with a benchmark to compare to, which gives the market they’re making some credibility.
Where I think it becomes controversial is when people are trading to try to exploit their pricing inefficiencies. They run a business, and need to strike a balance between providing a product that is fair enough to compete and get business, but that doesn’t mean they make big losses.
It’s not a new tactic though. If you look at sports arbitrage trading, it’s part of the territory becoming limited by bookies and not being able to put full amounts of bets on because of trading activity – which screw up your arb and expose you to losses. They don’t like people ‘beating’ their system, and their T&Cs that you sign up to when you join are normally tight enough for them to enforce these sorts of things when appropriate. And sometimes, they get it wrong and limit completely “innocent” people.
What is useful to read about is any factual information about tactics or practices that sites use to protect themselves from techniques such as scalping, and which sites are better to use.
At the same time, for a casual trader with CMC, wanting to place a few positions on the indices and UK shares for example, I don’t think you need to be too concerned with getting your eyeballs ripped out by things like slippage etc.
