MarvinS said:
But is it not the case that every trader wants the lowest spreads the fastest execution and the best service? I have heard that FB are good but lack some qualities. For example do traders want to deposit monies abroad with a non regulated company? Do traders want to choose their stakes? Do traders want to have the lower margins? Credit on accounts? These points may not all apply to you but we are trying to cover as many bases as possible and Swissy your point is a key aspect of trading that we must cover. I have traded with Saxobank that has DMA and even that can take a few seconds to confirm trades...
An inside view into Futuresbetting.com
Interview with Mike Larkins Managing Director of Futuresbetting.com Ltd conducted by Andy, co-editor – Financial-Spread-Betting.com.
Financial-Spread-Betting: First and foremost I want to thank you for being patient with me and taking the time to do this interview for our Financial-Spread-Betting.com readers. How's everything on your end?
Mike: We are very happy with our business and greatly enthused by the positive feed back from our customers, who recognize that we are offering something new to the market place.
Financial-Spread-Betting: Before we get to your service, can you give us a quick run down on how you first got involved in this industry and for how long? What role do you play with Futuresbetting.com Please introduce yourself and your company to our readers and tell us a little about the founders’ background.
Mike: I am the Managing Director and co-founder with Keith Langan of FuturesBetting.com Ltd. Keith and I were independent traders on the LIFFE floor since 1985 before relocating to Gibraltar in 2000, whence we became involved in remote electronic trading. So we have considerable experience not only from the trading side, but also from the provision and management of remote connectivity systems.
Although the idea behind FuturesBetting.com was thought of in 2002, it took over 2 years of negotiations to obtain a Gibraltar gaming license, and a further year to be authorized as a Category 1 firm by our regulator, the Financial Services Commission (FSC).
Financial-Spread-Betting: Ok to start, so when did FuturesBetting.com open its doors to business?
Mike: We opened for business in March 05.
Financial-Spread-Betting: It is my understanding that FuturesBetting.com is located in Gibraltar. Why did you choose Gibraltar as a base jurisdiction?
Mike: Well we were already doing business in Gibraltar, so from that perspective it chose itself! More seriously though Gibraltar has an established, well administered and above all globally recognized and trusted gaming industry. We are one of only 15 companies (but the only spread betting company) to be awarded a gaming license, and in the good company of Party Gaming, 888 Holdings, Victor Chandler, amongst others!
Financial-Spread-Betting: Is FuturesBetting.com regulated by a Regulatory Body (it is our understanding that you are regulated by the Gibraltar Financial Services Commission?)? Are there any general safeguards for clients - protected accounts for clients' money or segregated accounts…etc?
Mike: Yes, we are regulated by the Financial Services Commission, who are of comparable status to other EU regulators under European law.
Furthermore an inter-Governmental agreement between the UK and Gibraltar reached just before Christmas will allow for FuturesBetting.com and other Gibraltar based financial services companies to have pass porting rights into the UK.
Our clients’ funds are held in client segregated accounts (that is ring fenced from other clients’ accounts) at the head office branch of Barclays Bank plc in London.
Financial-Spread-Betting: Does the Financial Services Commission regulation apply to foreign nationals? i.e. if you are a UK citizen do you get the protection in Gibraltar? Are profits still tax-free for UK residents using FuturesBetting.com to spread bet?
Mike: Yes; in fact all EU citizens are afforded protection under the European regulatory umbrella of which the FSC is part. Once the pass porting procedure is completed UK based clients will have direct recourse to their own regulator, the FSA.
The location of FuturesBetting.com does not affect the tax position of a UK resident. Betting with us in this respect is no different to betting with any other UK based spread betting company.
Financial-Spread-Betting: What dealing platform do you use? What would you say really stands out about it?
Mike: Rather than have a generic “one size fits all” platform, we license two, one for Futures and the other for Equities. Each has attributes that make it the best for the specific job in question.
Our futures platform has been accredited Tier 1 by the Exchanges on which we do business, and offers professional standard robustness and connectivity speeds. With FuturesBetting.com if you click to bet you will receive a fill within approximately 200 milliseconds!
As for Equities not only is the platform quick and robust, but because transactions are not dealer vetted the trading interface generates immediate price confirmation. In fact the speed of execution can be compared to many institutional systems.
Financial-Spread-Betting: How is your offering different from the traditional ‘spread betting products’ being offered by your counterparts in the UK?
Mike: Well consider this: In 2001 UK gaming companies agreed to be taxed on a Gross Profits Tax system, which for financial spread bets is 3% of their winnings. All spread bets are offered with reference to an underlying security, so the bookmaker or spread betting firm has two options, to hedge or to run a book. If the bookmaker chooses to run a book, it is backing itself over the client, and clearly aims to win rather than lose the bet. On the other hand if the bookie/spread betting firm chooses to hedge, then under current legislation, any arising hedging gains are not off-settable against the original bet and are therefore subject to corporation tax.
No doubt your readers will make their own minds up, but it’s difficult not to come to the conclusion that the model is built around the customer losing.
FuturesBetting.com however, pays a license fee based on turnover, but where the hedge is off-settable. Our unique offering is we make no reference as to whether the client is long or short, that our spreads are fixed around the underlying security (whatever the market conditions) and also that in order to sustain our connectivity speeds we must automatically hedge every transaction. So you can see from our set-up that clearly we want the client to win!
Financial-Spread-Betting: It is said that your offering is very akin to futures trading. Could you walk us through your offering?
Mike: You’re right, it is. We show our clients the underlying market as seen by all the other market participants. Clients can view the market depth, price and size action of the various players. Given the speed at which we automatically hedge, betting with us has the same feel and effect as if the client was trading direct market access (DMA).
Furthermore in March we will be offering clients a choice of 3rd party front-ends that interface via API with our back-end for both Futures and Equities. Around this time a “Black Box” technology for futures will also be available.
Financial-Spread-Betting: How do I open an account to spread bet with FuturesBetting.com?
Mike: Application forms may be downloaded from our website
www.futuresbetting.com . However we can only accept individuals who possess the experience, knowledge and expertise to make their own investment decisions and properly assess the risks they incur. We are not able to accept individuals who are classified as "ordinary customers" by our regulator, the Financial Services Commission. In FSA parlance our clients must be of “intermediate” status.
Financial-Spread-Betting: Do you quote all UK companies or only those within a substantial market cap? What kind of notional risk can one expect on a typical market? Can one bet outside market hours?
Mike: We quote FTSE 350, AIM 50, S&P 100, Nasdaq 100, Dow 30, Dax 30, Mib 30, Cac 40, and Aex 30. We don’t do “after hours” because we cannot provide fixed spreads if the underlying market is closed.
In respect of deposit our minimum is 15%. As a company we operate a strict risk policy; we do not believe in unrealistic gearing and never offer credit. From my experience as an independent trader I firmly believe that responsible margining is in the trader’s best interest.
Financial-Spread-Betting: Is telephone dealing available? Are there any additional fees for using this service?
Mike: Yes we have a dealer desk for telephone bets, but whilst we make no minimum charge for any bet made with us, telephone bets are subject to a fee of £0.50 per lot for futures, and for equities £20 per bargain.
Financial-Spread-Betting: Something which day traders and those doing more frequent spread deals are definitely going to like are your sliding scales of spread widths depending on the volume traded. Could you tell us how this works in practice?
Mike: Quite simply we have 7 different volume bands for futures, and 6 for equities. We discuss with a client the volume of bets they are likely to make and place them in the appropriate band. We provide the platform and a number of additional services free of charge, so in order to recoup our costs, the smaller volumes have to pay a wider spread than the high volume players. Our range on FTSE futures is a spread of 0.4/tick (the equivalent of £4.00 per lot), decreasing to 0.045/tick (£0.45 per lot). UK equity stocks range from 15 basis points down to 4 basis points.
Financial-Spread-Betting: Do you accept international clients? Do you accept deposits by BACS? Which other payment methods do you accept?
Mike: Yes we do and deposits are accepted by BACS, CHAPS or by cheque.
Financial-Spread-Betting: It is our understanding that the minimum deposits required to open an account is £5000. Isn’t this a little big an amount to send as a first deposit? What are Mini Accounts?
Mike: £5000 is actually the minimum deposit for a mini account, which for an experienced trader is not an unreasonable amount. We do not accept “retail” accounts.
Financial-Spread-Betting: Is there a maximum deposit? How do I get money out?
Mike: No there is no maximum. Clients are free to withdraw funds on our receipt of their faxed or emailed instruction.
Financial-Spread-Betting: What are the minimum/maximum stakes?
Mike: In futures our minimum is a bet equivalent in value to the tick size of one lot, and for equities the minimum is 100 shares or £1 per point. The maximum is determined by the clients account balance.
Financial-Spread-Betting: Is interest paid on the balance of the accounts? If yes, what are the rates? Are dividends paid out?
Mike: No, we do not pay interest on cash balances, but yes we do pay an adjustment in lieu of dividend. For UK stocks we pay 90%, for US and European 85%. Of course short positions are charged at 100%, which is the norm.
Financial-Spread-Betting: Do you offer credit facilities? Can accounts be overdrawn?
Mike: No, FuturesBetting.com does not offer credit and therefore accounts cannot be overdrawn.
Financial-Spread-Betting: Do you offer a demo account facility?
Mike: Yes we have simulators for both futures and equities, which replicate live trading without the bets getting matched.
Financial-Spread-Betting: Please detail the kind of stops and market orders being offered by FuturesBetting.com
Mike: We offer a full range of orders including Limit, Stop, Stop Limit, Market On Close, Market On Open, One Cancels Other, and Good ‘Till Canceled. Further details can found on our website
www.futuresbetting.com
Financial-Spread-Betting: To whom do you think will spread betting on FuturesBetting.com appeal most?
Mike: Experienced traders who require what we provide: Tax free spread betting with the price and connectivity of direct market access, together with good information flows which we uniquely provide through our real time squawk facility.
Financial-Spread-Betting: What has been the clients' reaction?
Mike: Comments like “a level playfield”, “breath of fresh air”, and “much better than normal spread betting” probably answers the question.
Financial-Spread-Betting: Who is predominantly making up your customer base at this time?
Mike: Our customer base is predominately made up of UK, Republic of Ireland, and European traders, all of whom are market experienced individuals betting for their own account.
Financial-Spread-Betting: Spread betting companies are sometimes criticized for playing the markets themselves against clients but it is our understanding that FuturesBetting.com is acting as a pure intermediary and hedges all positions. Could you give us some insight about how you are able to hedge your exposure with such short term “target” time frames?
Mike: Personally I think the criticism is entirely valid. Making variable spreads or re-quotes whilst potentially knowing a clients position cannot be right. Worse still the client is more often than not giving up too much of an edge on the spread to stand a chance of making money. No wonder some 90% of spread bettors lose money. FuturesBetting.com on the other hand is completely transparent. Every price we make can be cross referenced to the underlying. If you are stopped you can independently verify from the exchange website that the future traded at that particular level.
How do we do it? Let’s just say very, very quickly!
Financial-Spread-Betting: Getting beyond the up-front process, how do your people actually execute? Do you have principles of execution?
Mike: We are the principal to every bet. Clients are either buying from or selling to FuturesBetting.com
Financial-Spread-Betting: What kind of spreads can one expect to find on FuturesBetting.com? How do they compare, in your opinion to other perhaps more conventional spread betting firms?
Mike: We work slightly differently in that our spreads are fixed around the underlying bid/offer. This fixed value depends on the volume of bets a client happens to be making.
As rule of thumb our widest spread would generally beat a conventional spread betting firms’ best spread, but thereafter as a client’s volume increases our spreads are priced to compete with the direct access brokers for futures and CFD providers for equities.
Financial-Spread-Betting: Please explain how you handle re-quotes and order confirmation times. And fast markets?
Mike: We don’t do re-quotes full stop. As for fast markets, it’s business as usual. We are open electronically and on the phone as long as the underlying market itself is open. The same can’t be said for some of the other companies if the Brent Crude Oil contract is anything to go by.
Financial-Spread-Betting: Which kind of trader is your platform most suitable? Can it cater for those looking into short-term trading or scalping or is it more suitable for those wishing to take longer time views (weeks or even a few months)?
Mike: Our platforms cater for every style of trading, from scalping to long term. Moreover if a client doesn’t like the presentation of our platform, they can always elect to use one of our 3rd party compliant front–ends instead.
Financial-Spread-Betting: Are there any other fees which our readers need to be aware of besides the spread? Do you charge a quarterly trading account fee or an account inactivity fee. Are there any charges for telegraphic transfers and late payments…etc?
Mike: We don’t have any account fees or inactivity fees, but we do charge for transfers.
Financial-Spread-Betting: What do you think are the other main advantages of spread betting besides the most obvious of it being tax-free and the leverage that it allows? And how big a deal is the tax-free status, given that rival trading products let you offset losses against gains?
Mike: For our clients any tax saving is a big deal! No off-set is the quid pro quo because everyone knows there’s no such thing as a free lunch.
Financial-Spread-Betting: Do you provide an advisory service? Please detail your squawk service (I guess it has nothing to do with screaming
) Is your charting software developed in-house? Any other services that you provide?
Mike: We are authorized by our regulator to provide advisory services and will be launching this later in the year. The squawk is a market commentary and real time news and data release service which is of particular value to scalpers too busy trading to read news stories. We do have in house charting, but a lot of our clients prefer to separately subscribe to commercial packages.
Financial-Spread-Betting: What services are you offering that others aren't? Why should clients choose FuturesBetting.com as their spread betting firm of choice?
Mike: In a nut shell we are offering an impartial and transparent level playing field. Trading is hard enough as it is without having the odds stacked against you.
Financial-Spread-Betting: How are you related to TwoWayFutures? Is TwoWayFutures a business partner of FuturesBetting?
Mike: TwoWayFutures are FSA regulated and act in the capacity of an Introducing Broker to us.
Financial-Spread-Betting: Do you trade on a personal basis? Have you made any mistakes along the way that you have learned from? If so, would you describe them?
Mike: Not anymore. No one in our organization is permitted to trade PA, because it is incompatible with knowing client positions.
What’s the worst (recurring) mistake I’ve ever made….where to begin! Over trading I’d say.
Financial-Spread-Betting: Are there traders who make a living through trading at
www.futuresbetting.com What is the trading style and methods that these traders use for winning consistently?
Mike: Certainly we have clients who do very well for themselves, but whether it’s their living and how they do it is not for me to say.
Financial-Spread-Betting: What do you think are the most important characteristics of the professional spread better?
Mike: Discipline.
Financial-Spread-Betting: As of now, what trends do you see in the markets people choose to trade? Are there any sectors, contracts, currencies, indices, particular markets where your clients are clearly more or less successful? Do you think this will change over time?
Mike: Most clients tend to specialize in one or two contracts on the futures, and stick with them. Likewise the stocks, clients have their particular favorites. So I wouldn’t say there is any identifiable trend there, and I don’t see things changing because most believe in sticking to the one they know.
Financial-Spread-Betting: There are many sayings in the markets; do you have a favorite one?
Mike: The first cut is the cheapest
Financial-Spread-Betting: Do you operate any other sites besides
www.futuresbetting.com
Mike: No.
Financial-Spread-Betting: Do you organize any training seminars or meetings which our readers could attend?
Mike: No we don’t get involved in training or seminars because we can only accept as clients individuals who already have experience in financial markets.
Financial-Spread-Betting: What do you see going forward?
Mike: We believe the future of spread betting is our model augmented by giving clients a choice of execution platform. From a company perspective the future is in the back-end not the front. Whilst we will always offer our own execution platform, this will be complimented by a choice of independent software providers (ISV’s) that will interface with our back-end.
Financial-Spread-Betting: Do you have any special sign-up trade offers for our readers who decide to give Futures Betting a try?
Mike: We offer an extremely competitive all round package which is generally accepted to be unique. We are completely transparent when it comes to pricing the spreads for any given volume (everything is published on our website
www.futuresbetting.com) so everyone knows where they stand.
That said we always make allowances for holidays and such like if volumes fall below the agreed floor of the band in question.
Basically we just try and give everyone a fair deal.
