ProSpreads, Spread Vs DMA conflict?

[Jack Hughes]

I was at a Prospreads seminar the other day and they claimed many times absolutely catagorically that the prices seen were the market prices exactly the same as anyone else in the world would see. They then add their spread on top.

It would be scandalous, very stupid and I suspect highly criminal for that not to be the case and I'd want to see some serious evidence before believing it.

Note: I haven't used them yet

Seeing the actual traded prices doesn't necessarily mean your orders are going through the real market. They only claim 'DMA functionality', not direct market trading, so it wouldn't be scandalous or criminal (and particularly not stupid if markets tend to self hedge, anyway). I still wonder if the system changed when LCG took over, which may be why the minimum account opening deposit and margins changed?

 

[chezlaw]

Seeing the actual traded prices doesn't necessarily mean your orders are going through the real market. They only claim 'DMA functionality', not direct market trading, so it wouldn't be scandalous or criminal (and particularly not stupid if markets tend to self hedge, anyway). I still wonder if the system changed when LCG took over, which may be why the minimum account opening deposit and margins changed?

It was made clear that you see the real market prices, trade at the real market prices and that when you take a position all that happens is that in fact they take the exact same position in the real market and pass it onto us with the addition of their spread.

They claimed they held no net position, made no markets and it made no difference to them whether we won or lost.

I'm not sure exactly what is being suggested but it sounds a serious claim.

 

[v01101999]

Interesting. Perhaps things changed when LCG took over and changed the name to Prospreads? I thought the Futuresbetting model was that bets were automatically entered in the 'real' market, the client paying extra spread instead of commission, but I've never quite understood how that made it qualify as betting.

Couldn't find a direct reference to DMA on the site, but they do say ' ...every bet made with us is hedged in the underlying market.'. Maybe that's just through Capital Spreads now, so the extra spread just pays for the absence of dealer intervention and platform speed?

Yes that is what my feeling is - when it was launched, I am very certain (but not 100% sure) that my orders would be in the underlying markets as I would see see the lot size go up (not in their on L2 but also on feeds available from my other brokers). I would also get filled if lots above me are filled even if offer has not moved to my bid level. Very easy to test of EuroDollar kind of market which remain on same bid/offer for ages. Only recently I started noticing that I am filled only when offer moves to my bid level.

 

[v01101999]

It was made clear that you see the real market prices, trade at the real market prices and that when you take a position all that happens is that in fact they take the exact same position in the real market and pass it onto us with the addition of their spread.

They claimed they held no net position, made no markets and it made no difference to them whether we won or lost.

I'm not sure exactly what is being suggested but it sounds a serious claim.

If you have any other broker feed (interactive broker or otherwise) which provide market depth, you can check it easily. Join bid at 5 level below on a calm market. ProSpread lot size will go up by your trade but exchange lot size will remain the same. Also as the market is moving, prospread lot size at your bid level will be 1 more than the market.

 

[stevespray]

If they claim "DMA functionality" then it should be possible for clients to get filled at the bid or ask without that price being surpassed. It sounds to me like you only get filled (if you sit on the bid or ask) when the price moves one tick through your level.... this is not DMA functionality in truth, instead it is just like spreadbetting with a narrow spread but paying addition commission costs based on the number of lots.

 

[v01101999]

If they claim "DMA functionality" then it should be possible for clients to get filled at the bid or ask without that price being surpassed. It sounds to me like you only get filled (if you sit on the bid or ask) when the price moves one tick through your level.... this is not DMA functionality in truth, instead it is just like spreadbetting with a narrow spread but paying addition commission costs based on the number of lots.

exactly - to me now it appears that it is any other spreadbetting company with possibly tighter spreads. But since they are taking 1 tick spread on each trade, the real spread does not look as tight. For a round trip trade it is 1 tick for buy + $10 + 1 tick for sell + $10 = 2 ticks + $20 = $45 (considering S&P500 futures). That is 0.9 S&P future points. Does not look tight compared to others.

 

[chezlaw]

If you have any other broker feed (interactive broker or otherwise) which provide market depth, you can check it easily. Join bid at 5 level below on a calm market. ProSpread lot size will go up by your trade but exchange lot size will remain the same. Also as the market is moving, prospread lot size at your bid level will be 1 more than the market.

Is that consistant with the orders being held locally on your PC rather than in an exchange book? Then, as I think they said, if you connection is lost the order disappears and reappears when your connection comes back.

 

[chezlaw]

If they claim "DMA functionality" then it should be possible for clients to get filled at the bid or ask without that price being surpassed. It sounds to me like you only get filled (if you sit on the bid or ask) when the price moves one tick through your level.... this is not DMA functionality in truth, instead it is just like spreadbetting with a narrow spread but paying addition commission costs based on the number of lots.

This would be very worrying. I understood they were claiming you would get filled at the bid or ask.

Warning bells are going off but I still very much expect it to turn out that they don't make any money on each trade above the stated spread.

I hope prospreads come along and clarify what's going on.

 

[Jack Hughes]

This would be very worrying. I understood they were claiming you would get filled at the bid or ask.

Warning bells are going off but I still very much expect it to turn out that they don't make any money on each trade above the stated spread.

I hope prospreads come along and clarify what's going on.

Don't think they ever said you could get filled at the bid or ask, just that you could place orders where you wanted. If trades really are DMA, I expect Simon from Capitalist Spreads will be posting on here soon to tell us that we should all be ashamed of ourselves for starting another conspiracy theory against poor little downtrodden SB cos.

 

[chezlaw]

Don't think they ever said you could get filled at the bid or ask, just that you could place orders where you wanted. If trades really are DMA, I expect Simon from Capitalist Spreads will be posting on here soon to tell us that we should all be ashamed of ourselves for starting another conspiracy theory against poor little downtrodden SB cos.

Its what i understood from the seminar, maybe I misunderstood. Its easy to clear up.

Simon: is the price you hedge at equal the price to the trader (+/- the stated spread)

 

[Jack Hughes]

Its what i understood from the seminar, maybe I misunderstood. Its easy to clear up.

Simon: is the price you hedge at equal the price to the trader (+/- the stated spread)

More importantly, is the trade automatically made in the real market?

 

[chezlaw]

More importantly, is the trade automatically made in the real market?

Don't want to quibble but that's less important imo.

As long as they are make no money other than the spread then any other shortccomings will get resolved as they strive to offer a better service. If they're making money by giving us bad prices then its a different ball-game.

With prospreads, I understood and want it to be the case that their interests and the interests of us punters are aligned via a straightforward service for a straighforward charge.

 

[arabianights]

Of course one interesting thing, even through a normal broker (e.g. IB) your order is aggregated with all the other clients' orders (so as to stop the broker having loads of orders at the same price in the order book which is against the rules). Or at least I understand that to be standard practice.

If another clients' orders are changed then back you go to the end of the queue!

Another reason for being a proper trader registered with the exchange...

 

[gc1]

... your order is aggregated with all the other clients' orders (so as to stop the broker having loads of orders at the same price in the order book...

I'm pretty sure this is not true for exchanges like the CME - their iLink protocol requires every order to have a unique account identifier of the end user. Hence the broker to CME links needing high throughput (a rating of 200 transactions per second is typical).

 

[v01101999]

Of course one interesting thing, even through a normal broker (e.g. IB) your order is aggregated with all the other clients' orders (so as to stop the broker having loads of orders at the same price in the order book which is against the rules). Or at least I understand that to be standard practice.

If another clients' orders are changed then back you go to the end of the queue!

Another reason for being a proper trader registered with the exchange...

I am pretty sure it is not true that IB aggregates client orders at same price. Also I have account with some other clearing firms in Chicago too and I have always noted that if I place an order at a bid via IB or via that clearing firm, it is always reflected in the the L2 data and I get filled as soon as orders above me are taken. Only with ProSpread/FB I started noticing that my orders get filled once the offer moves to my bid.

 

[stevespray]

So effectively you always have to pay the spread even if you are sitting on the bid / ask (assuming that your order gets filled).

My understanding of these 'DMA in a spread bet wrapper' services was that the platform was direct access? Having done x number of trades I presumed that the back office simply deducted their commissions and did the legal bit to make the contracts into a bet?

Steve.

 

[A Dashing Blade]

So effectively you always have to pay the spread even if you are sitting on the bid / ask (assuming that your order gets filled).

NOT the bid/ask market spread, a "spread" that is exactly analagous to a brokers "commission". ie say the market is 99-100, and you successfully buy at the bid. The total cost to you is (say) 99.5 where the 0.5 represents their "spread" (ie commission).

 

[A Dashing Blade]

If they claim "DMA functionality" then it should be possible for clients to get filled at the bid or ask without that price being surpassed.

This indeed occur, I've been filled many a time (Eurex bunds & Stoxx) without the price ticking through (or before the price ticks through). In fact I'd call it routine.

 

[A Dashing Blade]

I was at a Prospreads seminar the other day and they claimed many times absolutely catagorically that the prices seen were the market prices exactly the same as anyone else in the world would see. . . .

I have personally benchmarked their prices in real time against Bloomber & Reuters feeds, you do see the real market. End Of.

 

[v01101999]

I have personally benchmarked their prices in real time against Bloomber & Reuters feeds, you do see the real market. End Of.

Yes you do see the real market but you don't trade it seems.