Watch out!

[tar]

i guess IG pays the full dividend : " A dividend adjustment is applied when a component share passes its ex-dividend date (including the ex-date of any special dividend) in the underlying stock market. In the case of long positions, the dividend adjustment is credited to the client's account. In the case of short positions, the dividend adjustment is debited from the client's account. "

 

[tar]

here is a detailed explansion how IG pays or charges the dividend : " if you have bought to open the dividend adjustment will be credited to your account and it will generally equal the dividend that would be received by a UK taxpayer holding the equivalent position in the underlying financial instruments (Net dividend).
If you sold to open the dividend adjustment will be debited from your account and will be no greater than the pre-tax dividend amount (gross dividend ). "

So there is some difference between how much they pay and how much they charge ...

 

[trader_dante]

Just a quick update on this. I did think the charge was excessive and I wrote an email explaining this and the fact that I had received no warning of it incurring, along with Arabian's comment on how the Dax reflects cumulative dividends.

Just received this response from them:

Your query has been investigated by our Dealing Team and they have confirmed that you should not have been debited for the dividend transaction with respect to your position in the Dax 30 Rolling Daily.

We will be correcting this today by reversing all incorrect dividend transactions and you will receive a confirmation email when your account has been re-credited with the amount of £73.96.

So, result Arabian and thank you very much for your comments.

I have to say, whether they tried to "stiff me" or not, this confirms what I've always said that E*Trade (now TD Waterhouse) have some of the best customer service around. I've got accounts with about 10 different brokers and E*Trade have always been the most courteous to me and the quickest to solve problems satisfactorily.

Anyway, thanks again to Arabian.

Tom

 

[meanreversion]

Indeed, at least for FX, so I don't agree with the proposition that SB is theft, although I did resent it a bit when Tradefair doubled their overnight FX charges with little or no warning. The credits were not doubled, needless to say. Still, I've made a reasonable amount out of rolling credits when the trades & interest rates have been in the appropriate direction, so can't complain too much. I'm a bit more careful now about what I leave running overnight, especially at weekends, although I feel in a way this is the tail wagging the dog, which worries me slightly. (I know there are those who say you should never leave anything running overnight with a SB firm, but that's for another thread I think).

City Index used to charge a 1 pct annual "roll" fee in FX but then doubled that to equal what IG were charging. Tradefair (one of their selling points was competitive financing) have recently increased their roll charge to 2 pct, so I'm guessing all spreadbetting companies are the same now.

[Please note that this charge is unrelated to the cost or benefit of carry. E.g. I could be short USD/ZAR and earn every night on the roll, but what I am earning will be reduced by the 2 pct a year charge, roughly 0.50 bp / night]

I've often wondered if this roll charge is justified or is simply a sneaky way of making money. In one sense, the SB companies probably do need to charge a little to reflect their margining costs when they hedge in the marketplace, but given that their net risk from all clients is fairly small, there is no doubt in my mind that this is a very nice earner for them. I'm starting to trade FX more through futures now.. no spurious roll charge there.

 

[trader_dante]

I'm starting to trade FX more through futures now.. no spurious roll charge there.

I used to trade FX Futures through DMA. My problem was the low liquidity in some of those contracts. Especially Cable.

Some of the people that complain about unfair "spiking" in some of the FX markets obviously never saw the ladder on Cable at 5am.

Also trading the crosses was difficult e.g. EUR/GBP involves twice the margin to enter both Euro and Cable not to mention the correct calculation to make sure the position is tilted in favour of your view.

 

[meanreversion]

I'm only trading the major USD crosses (EUR, GBP, AUD, CAD, JPY) through IB. Liquidity seems reasonable so far, but ask me again in a year ..