prospreads.com

[ProSpreads]

Still no reply from Prospreads........

Hi Truth Seeker

ProSpreads’ ‘Professional’ categorisation of its clients is based on criteria set out by the EU wide Markets in Financial Instruments Directive (MiFID). These criteria are a combination of net worth, understanding margined products, and frequency/experience of trading.
So they are not related to whether a gambler is a ‘professional gambler’ or not, but ensure that the applicant has a good understanding of the products he intends to trade and the risks associated with trading them.

Anything else, please let us know.

 

[ProSpreads]

To get an account with Prospreads, you must sign to: "I understand that when placing a spread bet, I will be trading outside of a regulated market" and "I understand that ProSpreads is under no obligation to comply with the rules of the exchanges with regards to my spread bet, although they will endeavour to do so".

Could someone explain the second bit, in particular the "with regards to". If they trade on an exchange, they do have to comply with its rules, so doesn't this boil down to "we don't have to hedge your trade"? The big question for me is to what extent and when do they take the other side from their client, which is not the same as hedging?

Hi Johnnn

The reason why we have an 'execution policy', which all regulated firms should have, is in the instances of when we don't trade on a regulated exchange of MTF. For example we may chose to take prices from an FX (Spot) liquidity exchange, which is not regulated. Also, the spread bet we offer you, although derived from an underlying product/exchange, is not a regulated 'exchange' in itself, although ProSpreads is regulated. You should find this policy on most, if not all regulated financial brokerage websites.

Anything else, please let us know.

 

[johnnn]

Hi and thanks for this. I understood the first bit. But the second bit is still puzzling. No rule of an exchange says what you should do with regards to a client's bet, so what is it exactly that you say you will "endeavour to do"?

And...to what extent and when do you take the other side from the client, in other words have an interest in the market moving away from them?

 

[Ross Spur]

Hi and thanks for this. I understood the first bit. But the second bit is still puzzling. No rule of an exchange says what you should do with regards to a client's bet, so what is it exactly that you say you will "endeavour to do"?

And...to what extent and when do you take the other side from the client, in other words have an interest in the market moving away from them?

I think this goes back to whether PS is DMA or not, the point being that you're trading their market and their rules, not with the exchange. They've said on here before that they use strategic hedging, so presumably this means they will nearly always have an interest in the market moving against the client, same as any other SB.

 

[x4x]

Hi PS, would appreciate a reply to this too..

Trading is trading, it is not and shouldn't be considered an investment. Buying and selling currencies (for example) is no different than a green grocer buying and selling tomatoes.

Therefore by signing a 'professional declaration' profits will be liable to INCOME TAX.

Prospreads T&C's mention that profits aren't subject to Capital Gains Tax - but beware - it is INCOME TAX that is payable.

Prospreads are happy to say profits are exempt from CGT, so if I'm wrong I'm sure they will be happy to say that profits are also exempt from INCOME TAX - but I feel they will more likely sidestep the question and say tax liabilities will depend upon individual circumstances and not something they can advise on, if so perhaps they could give an example of 'general circumstance' whereby INCOME TAX wouldn't be payable.

I hope I'm wrong and await their reply.........

 

[pit pony]

I think this goes back to whether PS is DMA or not, the point being that you're trading their market and their rules, not with the exchange. They've said on here before that they use strategic hedging, so presumably this means they will nearly always have an interest in the market moving against the client, same as any other SB.

Ross

as it has been said before, they can hedge a client if they wish, doesn't mean every client is hedged, to be honest I don't care if they hedge or don't hedge my trades as long as I am getting a real market price. And I have constatley tested the prices against my Futures platform and they are the same. If I loose money who cares who makes it.

 

[ProSpreads]

I think this goes back to whether PS is DMA or not, the point being that you're trading their market and their rules, not with the exchange. They've said on here before that they use strategic hedging, so presumably this means they will nearly always have an interest in the market moving against the client, same as any other SB.

Hi Johnnn & Ross Spur

There are several DMA providers in the financial trading space and they all enter the market on behalf of the client, via a General Clearing Member (GCM) or Prime Broker (PB); as opposed to the client themselves entering the market.

ProSpreads, as a DMA provider, works in the same way :
Our multi-asset class DMA platform connects directly to the world's futures and equity exchanges, as well as providing FX liquidity from some of the major banks, via Currenex. Via the DMA platform clients can trade the major indices, single stocks, currencies( futures), Spot FX, commodities, metals, bonds and interest rates… all as a spread bet. We have recently added equities to our product offering and currently offer the FTSE 100 & FTSE 250 along with Eurostoxx 50 however, with US stocks coming online shortly.

The equity connection utilises a smart order router, which scans the primary exchange and some of the MTFs, ensuring you get the best price available, while continuing to deliver exceptional low latency execution. When a client selects a trade, ProSpreads enters the underlying market, transacts a corresponding hedge and fills the client as a spreadbet. Due to the advanced DMA technology used, all this happens in a fraction of second. If ProSpreads chose not to hedge your spread bet, for example in a highly liquid contract, clients will still experience the same transparency, speed of execution and trading functionality that is offered by the exchange or liquidity provider with a DMA connection i.e. you can join the bid/offer or even place your order in the middle of the underlying market spread, and as a result clients never experience re-quotes.

As a DMA provider, ProSpreads’ primary revenue is derived from the difference between the spread bet price and the hedging price and therefore wants its clients to trade actively and profitably so they continue to trade ongoing.

If you are either/both in the vicinity of Gibraltar at any time it would be great to meet you and show you the operation and specifically the technology. Alternatively, I am in London from tomorrow for the remainder of the week, so would be more than happy meeting up in the City.

Regards, Simon

 

[johnnn]

Ross

as it has been said before, they can hedge a client if they wish, doesn't mean every client is hedged, to be honest I don't care if they hedge or don't hedge my trades as long as I am getting a real market price. And I have constatley tested the prices against my Futures platform and they are the same. If I loose money who cares who makes it.

Yes but if they have an interest in the market going against you, that's an incentive for them to get up to the shenanigans that we know other SB firms get up to. This is my main concern about them.

 

[ProSpreads]

Yes but if they have an interest in the market going against you, that's an incentive for them to get up to the shenanigans that we know other SB firms get up to. This is my main concern about them.

Hi Johnnn.
I am more than happy to show you myself exactly how it works, if you can get up to the City this week. Please let me know..
Also we always show the underlying market price in every instrument and you will always trade on the underlying price, so it is extremely transparent all the time..
Simon

 

[ProSpreads]

Hi PS, would appreciate a reply to this too..

Trading is trading, it is not and shouldn't be considered an investment. Buying and selling currencies (for example) is no different than a green grocer buying and selling tomatoes.

Therefore by signing a 'professional declaration' profits will be liable to INCOME TAX.

Prospreads T&C's mention that profits aren't subject to Capital Gains Tax - but beware - it is INCOME TAX that is payable.

Prospreads are happy to say profits are exempt from CGT, so if I'm wrong I'm sure they will be happy to say that profits are also exempt from INCOME TAX - but I feel they will more likely sidestep the question and say tax liabilities will depend upon individual circumstances and not something they can advise on, if so perhaps they could give an example of 'general circumstance' whereby INCOME TAX wouldn't be payable.

I hope I'm wrong and await their reply.........

Hi x4x

We are obviously not in a position to advise you on your personal tax affairs, but are comfortable offering our product as a spread bet.
Although there are several sources of analysis on this tax point, you could get an opinion from a lawyer or accountant to confirm your personal situation and provide comfort with regard to tax; as many other traders have done.

Regards

Simon

 

[Ross Spur]

Hi Johnnn & Ross Spur

There are several DMA providers in the financial trading space and they all enter the market on behalf of the client, via a General Clearing Member (GCM) or Prime Broker (PB); as opposed to the client themselves entering the market.

ProSpreads, as a DMA provider, works in the same way :
Our multi-asset class DMA platform connects directly to the world's futures and equity exchanges, as well as providing FX liquidity from some of the major banks, via Currenex. Via the DMA platform clients can trade the major indices, single stocks, currencies( futures), Spot FX, commodities, metals, bonds and interest rates… all as a spread bet. We have recently added equities to our product offering and currently offer the FTSE 100 & FTSE 250 along with Eurostoxx 50 however, with US stocks coming online shortly.

The equity connection utilises a smart order router, which scans the primary exchange and some of the MTFs, ensuring you get the best price available, while continuing to deliver exceptional low latency execution. When a client selects a trade, ProSpreads enters the underlying market, transacts a corresponding hedge and fills the client as a spreadbet. Due to the advanced DMA technology used, all this happens in a fraction of second. If ProSpreads chose not to hedge your spread bet, for example in a highly liquid contract, clients will still experience the same transparency, speed of execution and trading functionality that is offered by the exchange or liquidity provider with a DMA connection i.e. you can join the bid/offer or even place your order in the middle of the underlying market spread, and as a result clients never experience re-quotes.

As a DMA provider, ProSpreads’ primary revenue is derived from the difference between the spread bet price and the hedging price and therefore wants its clients to trade actively and profitably so they continue to trade ongoing.

If you are either/both in the vicinity of Gibraltar at any time it would be great to meet you and show you the operation and specifically the technology. Alternatively, I am in London from tomorrow for the remainder of the week, so would be more than happy meeting up in the City.

Regards, Simon

That's the clearest description of how it works I've seen, but there appears to be a contradiction here:

When a client selects a trade, ProSpreads enters the underlying market, transacts a corresponding hedge and fills the client as a spreadbet. Due to the advanced DMA technology used, all this happens in a fraction of second. If ProSpreads chose not to hedge your spread bet, for example in a highly liquid contract,

The original claim of Futures Betting was that the platform automatically transacted a corresponding hedge and filled the client in a fraction of a second, but here you're saying that you might choose not to hedge, so presumably you must be deciding that before the bet is placed? In either case I can't see how it's DMA for the client.
The bottom line seems to be that it's not very different from any other SB, except that you pay extra spread to cover the expense of hedging every trade, even when it's not necessarily being hedged.

 

[pit pony]

That's the clearest description of how it works I've seen, but there appears to be a contradiction here:

When a client selects a trade, ProSpreads enters the underlying market, transacts a corresponding hedge and fills the client as a spreadbet. Due to the advanced DMA technology used, all this happens in a fraction of second. If ProSpreads chose not to hedge your spread bet, for example in a highly liquid contract,

The original claim of Futures Betting was that the platform automatically transacted a corresponding hedge and filled the client in a fraction of a second, but here you're saying that you might choose not to hedge, so presumably you must be deciding that before the bet is placed? In either case I can't see how it's DMA for the client.
The bottom line seems to be that it's not very different from any other SB, except that you pay extra spread to cover the expense of hedging every trade, even when it's not necessarily being hedged.

There is no pleasing some people is there, go and meet the guy or is it that you only trade £1 a lot so couldn't have an account anyway.

 

[rawrschach]

It's obviously not DMA - it's spread betting. It just happens to be like DMA. Plus their spreads are tighter than normal SB and you're basically paying commission.

Basically it's DMA in a spread bet wrapper with more expensive commissions but no tax on profits.

 

[kerching]

could someone detail how the below example would look if trading with Prospreads? (0.5 each way for this instrument)

with usual "Shenanigans R Us" SB bucket shop - instrument fx GBUSD spot. stake £10 per pip. 2 pips fixed spread.


buy @ 16000 you are -2 pips if price doesnt move
a: if you close out at 16000 you are out of pocket by £20 (commission in spread)
b: if you close out at 16002 you break even at £0 (commission in spread)
c: if you close out at 16050 you are 50 pips from entry: you realise 48 pips £480 / -2 for spread(commission in spread).

i can't figure out if actually paying commission for the trade is actually the same in real terms of using fixed spreads at normal bucket shop SB's? in the "b" example above with a normal SB (closing out at 16002) you break even without costs as such although you've had to make ground on price. with Prospreads im assuming you will break even (ie zilch dinero in your sky rocket) but incur costs of spread and their wrapper commission anyway?

having never used DMA , what will be the general spread of the underlying market...i'm asuming 1 pip in general terms? NFP etc aside.. so plus 0.5 each way that would be 2 pips commission regardless of outcome?

i'm looking to go live with SB (having been reasonably consistent & profitable on demo for the past year) and thought Prospreads would at least eliminate the underhand bollox other SB's appear to inflict on "consistent" winners. still none the wiser having read 47 pages of this thread... further analysis welcome.

edit.. plus not 100% sure the numbers add up on the spread/commission side hence my post.

 

[Xeno]

i can't figure out if actually paying commission for the trade is actually the same in real terms of using fixed spreads at normal bucket shop SB's? in the "b" example above with a normal SB (closing out at 16002) you break even without costs as such although you've had to make ground on price. with Prospreads im assuming you will break even (ie zilch dinero in your sky rocket) but incur costs of spread and their wrapper commission anyway?


my post.

There's no difference. To compare brokers you might as well assume the price stays still, there's no point in talking about break even. In both cases you 'pay' a spread. The normal DMA spread on GBPUSD is 1 pip. Both brokers are offering you their price, just derived slightly differently. In both cases the spread is what you pay and is the total cost (where the spread with PS is defined as the DMA spread, which is what you see, plus the commission spread)

 

[kerching]

There's no difference. To compare brokers you might as well assume the price stays still, there's no point in talking about break even. In both cases you 'pay' a spread. The normal DMA spread on GBPUSD is 1 pip. Both brokers are offering you their price, just derived slightly differently. In both cases the spread is what you pay and is the total cost (where the spread with PS is defined as the DMA spread, which is what you see, plus the commission spread)

Xeno thanks for your answer bud...so are you saying that the price i will get via Prospreads DMA immediately upon execution is superior to negate the overheads of 2 pips? because on the SB bucketshops at point of entry i will need price to move +2 to get out flat?

 

[Xeno]

Xeno thanks for your answer bud...so are you saying that the price i will get via Prospreads DMA immediately upon execution is superior to negate the overheads of 2 pips? because on the SB bucketshops at point of entry i will need price to move +2 to get out flat?

Not necessarily. I'm saying there is no real difference in the cost to you.

If the SB place is 2 pips, and PS is 0.5 on either side of a typical 1 pip DMA spread, then you will end up paying 2 pips to get in and out with both, so they are exactly the same. Forget about price move. Just compare the total spreads.

(with DMA the spread varies, but during normal hours for most popular products it's equal to the minimum price chance possible (tick))

 

[gc1]

Remember when comparing them to conventional SB firms you can only trade in multiples of the underlying market contract sizes (e.g. multiples of $12.50 or $10 per pip for Euro futures/cash, multiples of $6.25 or £10 per pip for Pound futures/cash, €25 for DAX, £5 FTSE, $12.50 ES etc.) This is likely to be a disadvantage for the smaller trader.

Do they still use that virtual desktop software for order entry? That's what put me off when I tried a demo. If they want to attract "professionals" they ought to allow the trader to choose their own order entry platform.

 

[Xeno]

Remember when comparing them to conventional SB firms you can only trade in multiples of the underlying market contract sizes (e.g. multiples of $12.50 or $10 per pip for Euro futures/cash, multiples of $6.25 or £10 per pip for Pound futures/cash, €25 for DAX, £5 FTSE, $12.50 ES etc.) This is likely to be a disadvantage for the smaller trader.

Do they still use that virtual desktop software for order entry? That's what put me off when I tried a demo. If they want to attract "professionals" they ought to allow the trader to choose their own order entry platform.

Good point. I stopped using them when they casually stopped supporting automated trading through Ninja Trader. Went DMA.

 

[A Dashing Blade]

. . . so are you saying that the price i will get via Prospreads DMA immediately upon execution is superior to negate the overheads of 2 pips? . . .

Only you can answer that.

Look, it's really simple. With PS you trade at the market price (not a spreadbet companies price) + their (fixed) comission.

Said it before and I'll say it again, I've personally benchmarked (by eye) the bund future against live ESignal, Reuters and Bloomberg feeds and was completely satisfied that the prices they were quoting were the live observable prices.