SB firm prices vs market prices

[tomorton]

Just remember when you SB you're not actually trading the market. The SB firm is effectively a shop and you buy and sell in the shop, at prices the shopkeeper sets. If he sees a bunch of people running down the road towards his shop waving £20 notes and shouting that interest rates are down and they need to buy somethng, do you think he will immeditaely drop his prices? Why? By now he's already got people banging on the door wanting to buy. Once the rush is overmprices will get back to normality.

As far as overnight is concerned SB prices are pushed out by biases so far in both directions that I usually cancel or widen out my stops out of market hours. I have been pointlessly stopped out by meaningless spikes too many times. Also had entry orders triggered and immediately followed by a reversal. Annoying when this happens while you're asleep. Its not that they are stop-hunting for you personally - their quotes have to reflect the futures market, even when the underlying stock market is closed. But don't think that just because the FTSE closed one night and opened the next at the same level that the SB quotes stood still overnight, they will not have.

 

[Neoripley]

Just remember when you SB you're not actually trading the market. The SB firm is effectively a shop and you buy and sell in the shop, at prices the shopkeeper sets. If he sees a bunch of people running down the road towards his shop waving £20 notes and shouting that interest rates are down and they need to buy somethng, do you think he will immeditaely drop his prices? Why? By now he's already got people banging on the door wanting to buy. Once the rush is overmprices will get back to normality.

As far as overnight is concerned SB prices are pushed out by biases so far in both directions that I usually cancel or widen out my stops out of market hours. I have been pointlessly stopped out by meaningless spikes too many times. Also had entry orders triggered and immediately followed by a reversal. Annoying when this happens while you're asleep. Its not that they are stop-hunting for you personally - their quotes have to reflect the futures market, even when the underlying stock market is closed. But don't think that just because the FTSE closed one night and opened the next at the same level that the SB quotes stood still overnight, they will not have.

I'm not sure if I agree with the first part of your post in that I've never experienced an SB price independent of the market. Maybe you should change your SB or at least make sure it's UK based (FSA and all that)? Who do you have an account with?

As far as I know they set their price for the day at a premium to the market (or in line with the futures) and it stays in lockstep throughout the day. If they were to adjust their prices based on their customers demand that would be racketeering surely - and that's illegal in UK. Even when/if their spreads widen the midprice stays the same (or at the same premium throughout the day). Much like Futures Fair Value is calculated out of market hours it stays the same even if the futures then trade at a premium or discount to the fair value during market hours. The SB prices always match the fair value EXACTLY, but it's leveraged (obviously) i.e. if S&P Futures fair value is at a .38c premium to the cash market, then S&P Daily Future on the SB platform may be 38.0 to the cash market.

 

[gle101]

I'm not sure if I agree with the first part of your post in that I've never experienced an SB price independent of the market. Maybe you should change your SB or at least make sure it's UK based (FSA and all that)? Who do you have an account with?

As far as I know they set their price for the day at a premium to the market (or in line with the futures) and it stays in lockstep throughout the day. If they were to adjust their prices based on their customers demand that would be racketeering surely - and that's illegal in UK. Even when/if their spreads widen the midprice stays the same (or at the same premium throughout the day). Much like Futures Fair Value is calculated out of market hours it stays the same even if the futures then trade at a premium or discount to the fair value during market hours. The SB prices always match the fair value EXACTLY, but it's leveraged (obviously) i.e. if S&P Futures fair value is at a .38c premium to the cash market, then S&P Daily Future on the SB platform may be 38.0 to the cash market.

Yes I agree, the price feed today is not a problem trading with SB. A few years ago there was a real problem of lagging quotes (seen from the SB point of view), that some traders could take advantage of by scalping. This is not the case today thought. SB today, have a high technology platform and an advanced "push through" engine technical solution, that will instantly display an accurate price quote, based on the underlying asset.

The main problem trading with SB today is "discrimination". By this I mean, flagging certain clients and categorizing them into specialized groups, that will by the platform system be handled accordingly, from a set of back office administrated parameters. These groups will receive an execution service, based on these criteria and parameters settings (resulting in dealer intervention and such). According to EU MiFID financial directives, this kind of manipulation of clients is not allowed, and does not correspond to its standard of rules.

 

[SanMiguel]

The main problem trading with SB today is "discrimination". By this I mean, flagging certain clients and categorizing them into specialized groups, that will by the platform system be handled accordingly, from a set of back office administrated parameters. These groups will receive an execution service, based on these criteria and parameters settings (resulting in dealer intervention and such). According to EU MiFID financial directives, this kind of manipulation of clients is not allowed, and does not correspond to its standards of rules.

How do you know that? Shouldn't happen they're all regulated.

 

[gle101]

How do you know that? Shouldn't happen they're all regulated.

This is a well known fact, if one has insight into the trading platform systems used. Some of this information is openly obtained on the Internet (I will not disclose links on this issue). Also representatives of the industry themselves admit they are flagging certain clients, based on their trading style. Sure there is some regulation in place, both from the FSA and MiFID. But according to the industry, it is subject to interpretation, on the regulation that is at hand. In fact MiFID clearly states that you are not allowed to "discriminate" clients, in order to limit the service given.

 

[SanMiguel]

This is a well known fact, if one has insight into the trading platform systems used. Some of this information is openly obtained on the Internet (I will not disclose links on this issue). Also representatives of the industry themselves admit they are flagging certain clients, based on their trading style. Sure there is some regulation in place, both from the FSA and MiFID. But according to the industry, it is subject to interpretation, on the regulation that is at hand. In fact MiFID clearly states that you are not allowed to "discriminate" clients, in order to limit the service given.

Maybe if you make hundreds of thousands. Besides, I think this is why I prefer to stick with FX. You can compare their charts to the actual interbank charts and see if there's any funny business. If that sort of thing went on, the wouldn't stay in business long, word would get around.

 

[gle101]

Maybe if you make hundreds of thousands. Besides, I think this is why I prefer to stick with FX. You can compare their charts to the actual interbank charts and see if there's any funny business. If that sort of thing went on, the wouldn't stay in business long, word would get around.

You don't need to make hundreds of thousands to make this happen.
FX is no safe haven, unless you are trading DMA of course. This is the problem with market makers, you are easily a subject to intervention of some sort. But let me point out that I feel that the SB industry is definitely heading in the right direction. Things are getting better as competition is increasing, along with clients getting more sophisticated. Also the oversight and regulation seems to fall into place, as SB hit the mainstream.

 

[SanMiguel]

You don't need to make hundreds of thousands to make this happen.
FX is no safe haven, unless you are trading DMA of course. This is the problem with market makers, you are easily a subject to intervention of some sort. But let me point out that I feel that the SB industry is definitely heading in the right direction. Things are getting better as competition is increasing, along with clients getting more sophisticated. Also the oversight and regulation seems to fall into place, as SB hit the mainstream.

Like what intervention? ...and don't say stop hunting.
Someone would have to analyse your trades and figure out a method if any. Why would they bother, they get money off the spread and offset their client net anyway.

 

[gle101]

Like what intervention? ...and don't say stop hunting.
Someone would have to analyse your trades and figure out a method if any. Why would they bother, they get money off the spread and offset their client net anyway.

They look at trade patterns, if you for instance are a short term trader, you will probably be detected by their "radar" sooner, rather than later. Apparently, what they are earning from spread is not enough. Otherwise, referral to a dealer would not be such a problem it is today, for some SB traders.

 

[SanMiguel]

They look at trade patterns, if you for instance are a short term trader, you will probably be detected by their "radar" sooner, rather than later. Apparently, what they are earning from spread is not enough. Otherwise, referral to a dealer would not be such a problem it is today, for some SB traders.

?
The spread is the spread, they have their system set up to not involve a dealing desk as much as possible. They're not going to increase the spread because you are a short term trader. They make more money of short term traders opening lots of trades than a long term trader

 

[gle101]

?
The spread is the spread, they have their system set up to not involve a dealing desk as much as possible. They're not going to increase the spread because you are a short term trader. They make more money of short term traders opening lots of trades than a long term trader

I am not talking about increasing the spread. I am talking about flagging you as a client, meaning you are put on referral to a dealer, resulting in, that you will eventually end up trading with that company.

 

[SanMiguel]

I am not talking about increasing the spread. I am talking about flagging you as a client, meaning you are put on referral to a dealer, resulting in, that you will eventually end up trading with that company.

eh?
SO you trade with spreadBet101.
What will they do to you?

 

[gle101]

eh?
SO you trade with spreadBet101.
What will they do to you?

spreadBet101?

 

[SanMiguel]

eh?
SO you trade with spreadBet101.
What will they do to you?

spreadBet101?

It's a made up name. You suggested in your post the company would pass you onto another company. I don't see why they would do that and even if they did, the trade is still traded according to their price data, which you can check.

 

[gle101]

It's a made up name. You suggested in your post the company would pass you onto another company. I don't see why they would do that and even if they did, the trade is still traded according to their price data, which you can check.

What I said is, it will be very hard to continue trading with the same company if you are on constant intervention by a dealer. Meaning, you will not get into, or out of a position with instant execution. I might still work if you are a swing trader, but definitely not if you are a short term trader.

 

[SanMiguel]

What I said is, it will be very hard to continue trading with the same company if you are on constant intervention by a dealer. Meaning, you will not get into, or out of a position with instant execution. I might still work if you are a swing trader, but definitely not if you are a short term trader.

I don't really understand the reasoning. Short term traders enter more trades, therefore they get more spread money than a swing trader entering only 1 trade every few days. It makes no sense to kick you. You trade with them for the instant execution, that is what they design their platforms for. The large majority of day traders are short term traders.

 

[gle101]

I don't really understand the reasoning. Short term traders enter more trades, therefore they get more spread money than a swing trader entering only 1 trade every few days. It makes no sense to kick you. You trade with them for the instant execution, that is what they design their platforms for. The large majority of day traders are short term traders.

Yes I understand you are confused, so are many SB traders as well. Often the SB will give an excuse as, they do not have time to hedge the position, or you have taken advantage of latency. As mentioned before on this thread, a SB do not hedge every position, only what is not balanced out by the book and what is outside their own internal risk management system. SB do play quite a few tricks, it is wise to know when these could be set into play against you.

 

[SanMiguel]

Yes I understand you are confused, so are many SB traders as well. Often the SB will give an excuse as, they do not have time to hedge the position, or you are taken advantage of latency. As mentioned before on this thread, a SB do not hedge every position, only what is not balanced out by the book and what is outside their own internal risk management system. SB do play quite a few tricks, it is wise to know when these could be set into play against you.

Your argument makes no sense.
Key to this is: the more trades a trader makes, the more money the SB company makes off the spread.
Short term trader trading EURUSD 4pip spread. 10 trades per week = 40pips to SB company.
Long term/swing trader 1 trade per week = 4 pips to SB company plus some small financing charges every night.
Therefore they prefer short term traders. Argue against that and I will believe you but you have not made a valid point so far.

 

[gle101]

Your argument makes no sense.
Key to this is: the more trades a trader makes, the more money the SB company makes off the spread.
Short term trader trading EURUSD 4pip spread. 10 trades per week = 40pips to SB company.
Long term/swing trader 1 trade per week = 4 pips to SB company plus some small financing charges every night.
Therefore they prefer short term traders. Argue against that and I will believe you but you have not made a valid point so far.

Sorry SanMiguel, I don't need to justify my standpoint. I just give you my sincere view point on these matters. You are free to reject them or go to somebody else for explanation.

 

[Phil Mibbutz]

I don't really understand the reasoning. Short term traders enter more trades, therefore they get more spread money than a swing trader entering only 1 trade every few days. It makes no sense to kick you. You trade with them for the instant execution, that is what they design their platforms for. The large majority of day traders are short term traders.

Your posts suggest that you're still in the honeymoon stage with spreadbet companies, SanMiguel. Sooner or later, you're going to find out the hard way what goes on!