Best Thread Capital Spreads

Overtrading

capitalspreads said:
There are many reasons why clients can get put onto dealer intervention and it is difficult to innumerate all of them.. but the biggest reason is if a client is 'overtrading' his account. (i.e trading 20 30 times a day). .. or we suspect that a client is scalping fast moving markets. We cannot "scalp" a client so we do not really like clients to scalp us
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Well, it appears you lost my account for no good reason then. I spoke to your head dealer Marc Pussard after I noticed very slow executions on my trades. While he did not admit that my account was on dealer intervention (he stated that the markets I was trading all were at the time), we did discuss my trading style. He did not make me aware at any time if my style of trading was unsuitable. I was jumping in and out of the market 20-30 times a day, but I was paying your spread each time. Sometimes I won, and sometimes I lost. The reason for this is partly my short term trading strategy (some of the details I explained to Marc) and also to minimise my risk from being in the market during such volatile periods when virtually anything can happen (including a major institution having cash flow problems when you are long the Dow, or the Fed manipulating the market when you are short!) If your staff had explained to me that you thought I was overtrading my account, I would have discussed your definition of overtrading and naturally ensured that I operated within your limitations. Not giving me the chance to do this, and handicapping my trading in that way without explanation is somewhat unreasonable.

Why could your staff not have contacted me to discuss my trading style? You have enough clients now that you should have a canned "you are trading to frequently - please trade less" email to send out. It is a mystery to me why you do this to frequent traders - unless they are trading so large that you hedge everything they do. This was not the case, and I am quite sure that £1pp-£5pp on the Dow is well within your book risk, even in a volatile market. I would not have had a problem with dealer intervention if the fills were 'fair' both ways, and the executions weren't so slow. 20 seconds each way adds almost a minute to a round trip, which isn't pleasant in an index.

What is your view of the above? You have previously said that you do not mind how often a client trades (providing the price is fair). You have never indicated that you will select a client for dealer intervention for this reason. Furthermore, do you appreciate how constant dealer intervention is an obstacle to legitimate traders who trade very frequently (I'm not talking about scalping here)? You can't get in and out as quickly as you want, and the discrepancy in the order system is disadvantageous. I can understand that your dealers would review orders over a certain size, and I suppose this is similar to having a large market order take out a few levels in the book, however when you are trading such small size that you are accustomed to automatic fills, the difference in the quality of the product is pretty stark.

Thank you very much for responding to this point. (oh, and on one day in question I was in and out of the Dow around 40 times the day you had problems with your price feed - half of these trades were done by calling your desk and all were on fair prices. Your dealers didn't mention to me that I was overtrading!)
 
Cancelling unfilled trades

capitalspreads said:
we used to have the ability for clients to cancel new orders /amend stops after activation etc BUT a significant number of clients just used it as an opportunity to place two 'new' orders either side of the current market just before big data releases and then cancelling any losing orders before we filled them leaving them with just the winning order.
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I'm not talking about "new" orders (or stops), I am talking about orders on a standard deal ticket. When you place a new trade you must sit and watch the progress bar until a dealer either fills the order or rejects it. During this time you cannot cancel the order. Given that a dealer has not seen the order, and therefore not filled it, it cannot possibly affect your risk. Given also that if the price has moved in the clients favour by a very significant margin, the trade will not be done. Would it not be fair and balanced to allow a client to cancel the trade before it reaches your desk?

Regarding the "loophole" in your systems - well done for getting that closed down. However, the solution would appear to be to just apply the relevant slippage to the winning orders. You can fill "new" orders at the next reasonable price, as opposed to standard deal tickets where it is fill or kill. If the Dow moves 40 on a NFP number, then fill any winning (and losing) orders at the next price you can get in that market. If you haven't filled a new order or stop, a client should be able to cancel it, and if the market moves through the order you do not have to give the pre-number price.

I'm quite looking forward to the MIFD directives and how the FSA interpret they apply to spreadbetting with regard to "best execution".

capitalspreads said:
not exactly rocket science but very profitable for some punters before we stopped it.
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Well, you have fixed that problem with regard to the new orders. However, for ordinary trades, do you accept that it would be fairer to the client to be able to cancel a trade at any time before it reaches your dealers?
capitalspreads said:
i would like to see what the company you mentioned would do if you were acting in this fashion !
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I would expect they would behave in the manner suggested above. I could cancel a losing order if I were fast enough and hit cancel before they filed me, and on the winning order there would be slippage.[/QUOTE]
 
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Slorm said:
Had this error been commited by a bank or the Inland Revenue it could have been years before the mistake was discovered but they would still claim (and mostly get) their money back. Without an army of auditors to check every transaction I would not consider a month a particularly long time and a with a 7000 point difference it is a pretty obvious error to all parties concerned, so I do have some sympathy for CS on this one.

I'm surprised that CS don't have an automated end of day procedure to pick up spikes so that these things could be investigated more quickly, and would not be difficult to implement.

The real issue is whether both parties to a bet should be held to it regardless of an obvious error. This is a double edged sword and I can imagine to howls of rage in this forum had the positions been reversed.

I am not a great lover of the SB firms but you can't have have it both ways. Errors can either always be corrected or never corrected, what you cannot have have is a situation where errors are only corrected if it favours one party.
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With respect, you have missed the point. It comes down to the party who are making the mistakes. Spreadbet contracts make punters responsible for all losses and all mistakes. Spreadbet contracts then attempt to exclude the firms liability for mistakes. If a spreadbet company puts through and unreasonable price, you have recourse because:

  1. They are to reference their quote to an underlying market
  2. They must be able to show that each quote was reasonable in light of where the underlying was trading

However, if the spreadbet company makes an error, and it goes in the clients favour, they have a loss due to their mistake, and they might well be liable to pay the winnings due from the contract. The current situation is unfair to the consumer because:

  1. The entire trade is reversed, even if part of the trade was done on the correct price and would be profitable if covered at the correct market price. This means clients lose out - absent the manifest error they would have profited from the trade. This would not apply when both ends of the trade are on bad price, but this is not always the case.
  2. CS have limited incentives to fix their system as they will never financially suffer from errors as they will reverse all trades, but clients who had profitable positions voided lose money.
  3. CS appear in most circumstances to find issues quickly, but in Harry's case it was around a month and the funds had been withdrawn. If a client trades on a less obvious erroneous price, they may have an undetermined liability to CS to repay that amount at a later date, without knowing of their obligation. In other words, clients could incur a debt they don't know about. This is worrying in the extreme. I think CS should internally define the maximum period that such things would go unnoticed, and then add something to the T&Cs which says "if a manifest error in the clients favour occurs, we may reverse the trade. However, if the trade has been done for more than 6 weeks prior to us notifying the client, we will forgive any debt arising from the reversal of this transaction".

I think this issue is getting done to death, but given that it could leave punters with massive debts to CS that they didn't know they had, I think it is important to discuss better solutions. I'll leave us with an undertaking from the FSA regarding pricing errors and Capital Spreads. It may interest some here.
 
lurkerlurker said:
I think this issue is getting done to death, but given that it could leave punters with massive debts to CS that they didn't know they had, I think it is important to discuss better solutions. I'll leave us with an undertaking from the FSA regarding pricing errors and Capital Spreads. It may interest some here.
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I'm not disagreeing with your overall point and part of this relates to my biggest dislike of SB firms poor practice which failing to correlate with the underlying instrument.

For example from memory CS were around 8 points adrift from UKX during volatile markets last week (not that it needs volatile markets to happen). If I place a £1 bet and suddenly find I'm £8 up because of the drift, well fair enough. If I found I was say £20 up I might think it a bit odd and grab the money, but if it was £7000 it's pretty obvious that something was seriously wrong.

It seems to me that it revolves around what it "reasonable", however what is reasonable must apply to both parties equally. But yes you're right it's been done to death now so I'll leave the last word to you.
 
There is actually something called ...the reasonable man test ,BUT it carries more weight where no written contract exists and a court therefore has to look for other evidence. Until I read that "undertaking" I had thought it might possibly be relevant even where there is a contract if errors are so gross as to be obvious to anyone monitoring them.However, that undertaking statement tends to suggest this manner of dealing with error activity is a breach of statutory law in which case I wouldn't have thought the reasonable man test would even be considered.
 
Differing Contract Terms

This is not to be taken as legal advice, however I read that the same way as you do. It appears that the earlier terms and conditions were amended per the FSA's request, but that Capital Spreads have inserted terms with the same effect into the contract.

Who else reads that undertaking as basically saying "you have a duty to provide your services properly, you hold clients responsible for their errors, therefore you must be responsible for your own"?

"Deleted. A manifest error. will now only be defined in the definitions section and listed as a reason for closing a trade". I would suggest that they can close an open trade based on a manifest error, but nothing there seems to give them permission to retroactively cancel contracts.

E*Trade spreadbetting are run by London Capital Group also - the FSA undertaking pertained to the Capital Spreads contract but the spirit of the decision will be binding on London Capital Group in respect of all its regulated activities. Anyone notice the key difference between the following two contract terms:

E*Trade spreadbetting

8.10 We may in our sole discretion close or cancel any or all spread bet contracts upon the occurrence of:
...
(d) a Pricing Error.​
(source)​

Capital Spreads
8.10 London Capital Group Ltd may at its sole discretion close any or all spread bet contracts upon the occurrence of:
...
(d) a Pricing Error​
(source)​

So Capital Spreads received the undertaking, and now manifest error is listed only as a reason for closing a trade. However, their E*Trade spreadbetting T&Cs attempt to allow them to "cancel" a spreadbet contract upon the occurrence of a pricing error. Why this difference? Both contracts effectively attempt to exclude liability for pricing errors, however one does so more stringently than the other.

If I had the time or the inclination, I'd read the contract terms for these other LCG brands:

http://www.dealingdesk.co.uk/generic/faqs2.shtml
http://www.webtradeindia.com/generic/faqs2.shtml
http://www.chspreads.co.za/generic/faqs2.shtml
http://www.bullbearspreads.com/generic/faqs2.shtml
http://www.mdsspreads.com/generic/faqs2.shtml
http://www.finansbet.com/generic/faqs2.shtml
http://www.equityspreads.com/generic/faqs2.shtml

They differ slightly. A cursory glance shows section 8.10 saying "close or cancel" in the vast majority of cases. The CS contract read with the FSA undertaking seems to suggest that they may use close but not cancel - but perhaps I am reading too much into this.

It is very interesting nonetheless. Remember, if anyone here thinks that any of these contract terms regarding excluding liability for pricing errors seems unfair, you are within your rights to contact the FSA and request that they investigate the contract terms. Remember to get a reference number, and be advised that the FSA cannot give specific advice, or indeed give further information about the investigation of a complaint.

I think that anyone who spreadbets with LCG and thinks the terms might be unfavourable should contact the FSA given the prior undertaking. Naturally if LCG are in compliance with the FSA, this would not be a problem for them - so I don't feel bad suggesting this as it is the right of any consumer to refer suspected unfair contract terms to the relevant qualifying body. If LCG are happy with their position, no doubt they would welcome further commentary from the regulator.

I for one would appreciate some regulatory clarification: LCG seem to be confident that they are operating within guidelines, and further that their policy is fair. Customers affected by this seem to disagree, and it is most certainly an unusual situation where a supplier can decide whether to unilaterally void a contract.

Simon, if you have received any guidance from the FSA in handling such matters, would it be appropriate to post this guidance here? Further, are you aware of anything in the FSA handbook which supports your position? Have you given any further thought to including a clause whereby profits a client has made from erroneous prices are not reversed after a certain period of time - I am sure you are in agreement that clients should not expect to have trades reversed a month or more later. If you believe that, then why not formalise it in your contract that your firm surrender the right to reverse any winning trades after 1 month from the date of the trade being closed? I am sure a gesture such as this would make clients a little more comfortable that they are truly entitled to any winnings. Remember that you define a pricing error in terms of your spread - as your spreads are quite tight, it is not reasonable to expect clients to be aware of 10/15 points difference for example. They would have a good faith belief that they are fully entitled to their profits. I agree that a 7000 point difference would be obvious to most anyone, but what about the more subtle errors?

I appreciate that there have been many posts since you last commented, and many questions have been asked of you, but I would hope you would take the time to address all of them publicly on this board. Thank you for your contributions so far - they have been most informative.
 
et al

regulators, in general, do not reply to questions they merely guide you to some pertinent rule or regulation and leave it to you to draw conclusions. Our terms were inspected for fairness some time ago.

The pricing error part of the contract is a 'two way' conduit. Whilst we can cancel a trade made on a pricing error , so can a client. Otherwise we could enforce pricing errors on clients no matter how outrageous, which would encourage 'biasing' of prices etc.

We are very confident that our interpretation of pricing error is the correct one. Whether we use the word 'close' or 'cancel'. Unlike our competitors we even define its specific meaning (Clause 2.0 Definitions) As I have often said I get e-mails almost every day from exchanges across the globe amending or cancelling trades.

we cannot put time limits on errors etc ..as can be seen across the financial industry .. mortgage holders getting refunds for taking out endowment mortgages twenty years ago... banks refunding charges made over many years.... etc etc. It might seem strange but we are covered by exactly the same rules as every financial institution. Time limits would be binding on both parties and we cannot restrict our clients time limit on a price error so we cannot put a time limit on ours either.

You can be assured that if there was some collateral p/l implications to the effects of a price error then we would take that into account in our deliberations. For instance if a position was closed by a price error (i.e a stop being triggered) we would have to look at subsequent price action (this is an FSA requirement !)

Clients can also take comfort that in the four years of being in business we have never once had a client chased for a debt created by the rolling back of a pricing error, in fact we have never (due to the stops policy on our platform) chased, beyond a phone call, a single client for debts on his/her account. Which, given the extreme volatility of markets on occasion, is truly remarkable. In reality we hardly ever have pricing error problems that go beyond a few days. I can only actually remember about three or four over the past few years.

Our total bad debt file over the entire period of being in business is less than £25K and this covers 15,000 clients.

slorm

the 'UKX' ticker is only updated once every 15 seconds . in the recent volatile situations this is a good as useless. We quote a price derived from the futures contract which is 'real time'. If we were 8 pips away from the UKX then it is almost certain that our price was the more accurate one.

harry hill is quite correct I did say that I would not comment again on his case.. I was trying to be 'global' rather than specific in my comments..my apologies to him.

Simon
 
Simon - would you mind answering my Q if you can (it got buried rather quickly)

"Perhaps I can reverse the question - my trading pattern on the FTSE daily (not with CS, yet) tends to be around 4-5 trades a day, with 3 being 0 gains or small losses, and the other 2 being either small (1-5 points) or medium (5-15 points) wins, net result around 10-15 points a day. My positions tend to be held for between 15 minutes and an hour.

Does this count as scalping? Does the amount bet per point affect your decision?"


Thanks again.
 
capitalspreads said:
slorm

the 'UKX' ticker is only updated once every 15 seconds . in the recent volatile situations this is a good as useless. We quote a price derived from the futures contract which is 'real time'. If we were 8 pips away from the UKX then it is almost certain that our price was the more accurate one.

Simon
Click to expand...

Thank you for your answer Simon, it was an observation rather than a criticism as it can work as much in the clients favour as the SB firm, but it does beg two further questions.

I spent some time last week comparing the difference between SB firms skew and UKX, including CMC, IG, GFT, CS et al and the difference seemed more marked with CS the others being in the 4 - 5 point range difference. This was not a scientific survey (ie I didn't bother to data capture) but having the monitors and processing power was able to keep them all open simultaneously to check. You would obviously not wish to make your algorithm public but it could perhaps do with a little tightening.

Personally, my main issue (which is not directed specifically at CS as all SB firms are guilty) is that a bet is offered/advertised as on UKX when in fact the actual bet is on the futures market. I accept that CS make this clear but I still consider it misleading particularly for newbies. Why not simply have a daily cash bet based on UKX which you update every 15 seconds?
 
ae589

no, we would not consider this scalping... scalping is when you are attempting to continuously jump on sharp price action. because the 'quoted price' on CS is just that, a quoted price, we cannot 'pull our price' as and when we wish ....our only protection is to have a client on dealer confirm ..... this is the single biggest difference between SB and DA as in the real exchanges there must be a counterparty on the other side to get your deal done(i.e if you want to buy there must be a seller willing to sell at that price)]

over 99% of our clients are on auto trade (not over data releases of course) if their trades are below a certain stake size (different for each market)

slorm

unfortunately the UKX ticker is generally very unreliable and gets skewed by temporary factors throughout the day and is also very lagging of futures prices. If for example the price has just updated on the UKX (and the next one is due in 15 seconds) and then the futures move up 10 points in just a few seconds the UKX index will still be saying the same old price and it will take a minute or so to get up to the futures equivalent price. In this time a canny punter would just be buying the UKX quote and selling our Rolling FTSE quote (now 10 points higher) and then waiting for the two prices to normalise (after a couple of minutes) and then just get out of both bets with a guaranteed profit.

So we (as with the other SB's) will never use the index ticker as a pricing feed

Simon
 
capitalspreads said:
So we (as with the other SB's) will never use the index ticker as a pricing feed

Simon
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Many thanks Simon, very good point.

Sorry to come back at you with another question. You mentioned earlier in this thread that there is going to be an upgrade to the CS platform, will this include a better charting package? (Feel free to ignore this if you don't want to reveal anything yet).
 
A few points

Simon, thank you for taking the time to respond. Unfortunately a few of my posts regarding the dealer intervention, and the cancellation of pending trades seem to have been missed, so I attach them below for your comment.

Could you clarify what you mean when you say the FSA requires you to look at subsequent price action if a trade is closed on an erroneous price? Further, while you cannot limit the rights of customers to request that trades done on erroneous price are reversed, what specifically prohibits you from having a company policy whereby you assure clients that any profits from trades done where at least one month has elapsed will not be reversed even if the price transpires to be erroneous. In practice, you claim that you would have noticed most errors by this stage, and that a month delay is highly unusual, however it gives clients piece of mind that they can keep their winnings. I would think you would be able to do this without limiting clients rights to redress - although I am sure I could have misinterpreted something.


lurkerlurker said:
Well, it appears you lost my account for no good reason then. I spoke to your head dealer Marc Pussard after I noticed very slow executions on my trades. While he did not admit that my account was on dealer intervention (he stated that the markets I was trading all were at the time), we did discuss my trading style. He did not make me aware at any time if my style of trading was unsuitable. I was jumping in and out of the market 20-30 times a day, but I was paying your spread each time. Sometimes I won, and sometimes I lost. The reason for this is partly my short term trading strategy (some of the details I explained to Marc) and also to minimise my risk from being in the market during such volatile periods when virtually anything can happen (including a major institution having cash flow problems when you are long the Dow, or the Fed manipulating the market when you are short!) If your staff had explained to me that you thought I was overtrading my account, I would have discussed your definition of overtrading and naturally ensured that I operated within your limitations. Not giving me the chance to do this, and handicapping my trading in that way without explanation is somewhat unreasonable.

Why could your staff not have contacted me to discuss my trading style? You have enough clients now that you should have a canned "you are trading to frequently - please trade less" email to send out. It is a mystery to me why you do this to frequent traders - unless they are trading so large that you hedge everything they do. This was not the case, and I am quite sure that £1pp-£5pp on the Dow is well within your book risk, even in a volatile market. I would not have had a problem with dealer intervention if the fills were 'fair' both ways, and the executions weren't so slow. 20 seconds each way adds almost a minute to a round trip, which isn't pleasant in an index.

What is your view of the above? You have previously said that you do not mind how often a client trades (providing the price is fair). You have never indicated that you will select a client for dealer intervention for this reason. Furthermore, do you appreciate how constant dealer intervention is an obstacle to legitimate traders who trade very frequently (I'm not talking about scalping here)? You can't get in and out as quickly as you want, and the discrepancy in the order system is disadvantageous. I can understand that your dealers would review orders over a certain size, and I suppose this is similar to having a large market order take out a few levels in the book, however when you are trading such small size that you are accustomed to automatic fills, the difference in the quality of the product is pretty stark.

Thank you very much for responding to this point. (oh, and on one day in question I was in and out of the Dow around 40 times the day you had problems with your price feed - half of these trades were done by calling your desk and all were on fair prices. Your dealers didn't mention to me that I was overtrading!)
Click to expand...

lurkerlurker said:
I'm not talking about "new" orders (or stops), I am talking about orders on a standard deal ticket. When you place a new trade you must sit and watch the progress bar until a dealer either fills the order or rejects it. During this time you cannot cancel the order. Given that a dealer has not seen the order, and therefore not filled it, it cannot possibly affect your risk. Given also that if the price has moved in the clients favour by a very significant margin, the trade will not be done. Would it not be fair and balanced to allow a client to cancel the trade before it reaches your desk?

Regarding the "loophole" in your systems - well done for getting that closed down. However, the solution would appear to be to just apply the relevant slippage to the winning orders. You can fill "new" orders at the next reasonable price, as opposed to standard deal tickets where it is fill or kill. If the Dow moves 40 on a NFP number, then fill any winning (and losing) orders at the next price you can get in that market. If you haven't filled a new order or stop, a client should be able to cancel it, and if the market moves through the order you do not have to give the pre-number price.

However, for ordinary trades, do you accept that it would be fairer to the client to be able to cancel a trade at any time before it reaches your dealers?
Click to expand...
 
?

Lurker.

Why, when you have voiced your displeasure at C.S. and then closed your account, do you continually request information from them?
 
ian said:
Lurker.

Why, when you have voiced your displeasure at C.S. and then closed your account, do you continually request information from them?
Click to expand...

I believe the issues I raise apply to enough readers of this thread, and indeed the remaining CS clients, to merit a full and open discussion. Just because I no longer have an account does not preclude me from taking an interest in how SB firms are run, general policies, and how other spreadbetters will be treated by CS. If I didn't ask the questions, somebody else would, and I am sure there are many who are glad I asked these questions. If I am taking the thread offtopic, or otherwise making inappropriate postings, feel free to point this out - however closing an account with them is not an impediment to requesting clarification and dialogue where it may inform and benefit others!

Is the purpose of this thread not to discuss Capital Spreads? Simon has been very forthcoming with providing information and answering questions - I was not aware this thread had been designated "existing CS clients only". Further, perhaps if I can see that CS have cleared up their issues, and have demonstrated a commitment to customer service sufficient for me to disregard a few isolated incidents, I may consider opening an account with them again.

Despite my obvious displeasure at the way a few things have been handled recently, and various other complaints posted here, I do believe that CS is "one of the good guys". Simon seems to put a lot of time and effort into customer relations, I have mentioned before that the CS staff are usually extremely polite and helpful, and CS has been very innovative in both product selection and the tight spreads on quite a few markets. Recently there has been much criticism, and many more questions, but if you read this thread in its entirety I think you would find that most comments regarding CS are complimentary indeed. Simon has also stated (if I recall correctly) that CS has high client retention numbers (compared with those published by other SB firms).

I can understand that in the SB business one could become jaded quite quickly, and feel that clients are demanding the impossible and criticising everything, so I think it is important to state that we are not trying to pick on them as much as get clarification of some issues and provide what will hopefully be helpful feedback.

What I would hope for going forward is for the team at CS to fix any outstanding issues in their platform so far as is reasonably practical, and I would think that no expense is spared in the IT development process (as appears to be the case at IG, others). Further, I would hope that they would communicate a little more with clients if they have any concerns regarding "overtrading" the account, or anything else, before taking more direct action. While I appreciate that staff have been overworked of late, it would be nice to have a return to what Simon may refer to as "their usual sunny selves". Generally it is not necessary to interact with dealers or support staff, but when issues do arise it helps if clients do not perceive staff to be irritated or defensive.

In all honesty I am a little annoyed at having to close my account. They did seem like a good firm to deal with, and the platform and dealing costs were very competitive. There was certainly some added value there. Thankfully IG has comparable spreads and execution times on the markets I trade, so I am not really disadvantaged by not having my Capital Spreads account any more. However, in much the same way as some of us would prefer to patronise the local delicatessen rather than the Tesco, I did prefer to trade with the "little guy" rather than the likes of IG. This fits in with my overall philosophy of supporting smaller businesses and enterprise where it is practical to do so. Unfortunately, I am also a stickler for politeness, and I can tolerate most things, but I would not wish to deal with a firm I felt were being rude. I had been very understanding of practically all issues up to that point, although the recurrent problems were becoming somewhat of a nuisance.

Nevertheless, this is going slightly off topic.
 
Simon…. A couple of points if I may….

In one of your previous posts you briefly mentioned the subject of clients being able to cancel orders or, as it stands, not being able to cancel orders. You recounted that your staff had detected clients cancelling or amending orders after they had been triggered – You say that Capital have put a stop to the practice which, on the face of it, appears fair. My question is…. Are you allowed to do that?

Please humour me whilst I raise few potential points!

Over the years I have had reason to read a good number of spread betting terms and conditions from one firm or another. In simple terms the ‘placing of a bet’ (opening or closing) always follows the same legal pathway. In contractual terms the spread betting firms never make offers to clients in respect of the prices quoted. By this I mean that the quoting of a price, either verbally on the telephone or via the internet website, never constitutes an offer by the company to trade at the quoted prices. The quoting of a price is purely the company’s way of conveying a price to the client which the company is ‘likely’ to contract at. I hope I’m correct so far! In effect therefore, since a contract can only be formed when there is an ‘offer’ followed by an ‘acceptance’, the ‘offer’ to trade is being made by the client (based on an indicated price) and the acceptance or non acceptance is made by the firm (dealing staff, computer or otherwise). A firm would never make ‘the offer’ since, if it worked that way, the firm would never be able to refuse a trade as a contract would be formed the moment that the client ‘accepted’ the firm’s ‘offer’.
This raises some interesting contractual points. Firstly, and most importantly, if a client submits an order (technically their ‘offer’) and it is sent for manual processing then a time delay occurs before the client finds out the result of their order (offer). From a legal perspective, if, during the delay, the client changes his / her mind he / she are well within his / her rights to withdraw the offer. This would apply to all orders which were waiting be it stop orders, limit orders or market orders. Limit and Stop orders are the same as market orders in respect of them being ‘offers’ made by clients to trade one way or the other at a particular price. In one of your previous posts you mentioned specifically that you had stopped clients being able to alter or cancel orders in the time period between the order being triggered and the order being filled – I would respectfully suggest that you can not do this. I understand the abuse which can occur through the manipulation of stop and limit orders in such a situation but this doesn’t alter the basic principles of contract law. In simple terms, if someone makes an offer then they can withdraw that offer at anytime up to the point at which acceptance is made – there is nothing that you or any other spread betting firm can do to change that. By stopping someone withdrawing an offer to trade you are implying that they are contracted at that price when in fact they are not. You can not create a situation where client is obligated to keep their offer ‘on the table’ whilst reserving the right yourself not to contract. By preventing a client from withdrawing their offer to trade are you not creating a situation of implied contract? (ie the client could claim that, because he / she couldn’t withdraw the offer to trade he / she considered that the trade was already binding).

Food for thought I’m sure you’d agree!!

Steve.
 
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