Best Thread CMC Markets owner answers your questions

[arabianights]

no problem PC.

What I'm trying to get at is that i don't think the point I've raised has anything to do with your platform/product offering.

Let's take an example.

An IB comes onto your dealers and says that each of their 100 underlying clients wants exposure to 1m shares of Vodafone VOD LN ( I know - you wish ), and each want to put cash up front and pay 0% funding.

that's a combined notional position of c£180m.

now i don't know what you charge, but let's say for a decent IB it's 5 basis points in and out.

so on this trade, you are grossing £180k in spread.

now obviously you can't run this naked, so either you tie up £180m which you don't have, thereby incurring finance charges from your bank (assuming you have that depth of facility with them) to cover the position, or you hedge using CFDs with your broker, thereby incurring funding. i imagine you probably pay c0.5% over 1mlibor, let's say 1.1% total.

now this is a cost to you of c£200k per annum that you're not recouping. in addition you are probably paying away 1-2bps in comm on the cfd, let's say 1, so that's another £36k round trip.

if the clients decide to run this position for 2 years your P&L would be -£256k - not accounting for the cost of having the infrastructure in place to handle the business!

THIS is what i mean about the product not being viable on the scale arabian suggested.

no amount of 'next gen' developments gets around this, but as ever if i am wrong i would love to be corrected.

But he would have the £180m... because the client would have had to deposit it before putting on the trade.

My other "revolutionary" spread betting idea: something like a FOBT. Let punters stick 10p a point on ftse in ladbrokes using something next to the roulette machine.... obviously stops would have to be guaranteed. It's workable, although regulatory issues may make it impossible...

 

[shortsell]

well it would do but....

have you really got that kind of cash on the balance sheet (don't feel the need to answer this, it's none of my business, i'm just expressing surprise)

if not, this would mean using your banking facilities - at a cost that would negate the spread received.

if you then scale this up we can say as a FACT you wouldn't have the cash available, which draws us back to this not being a profitable prospect.

 

[shortsell]

arabian, as per recent fsa rulings, client funds cannot be used to cover broker margin by the SB company*, and the interest earned on them would be far outweighed by the cost of borrow on the cash they would have to place with their brokers.

and the bigger the product became, the less profitable it would be.

 

[shortsell]

*hence their recent withdrawal of aim stocks IMO

 

[PC at CMC Markets]

hi short sell
well the clients would give us the £180million up front to avoid finance and buy the stock so dont need a facility. If they dont put the full funds up front to start with then it becomes cfd and we charge finance.

pc

well it would do but....

have you really got that kind of cash on the balance sheet (don't feel the need to answer this, it's none of my business, i'm just expressing surprise)

if not, this would mean using your banking facilities - at a cost that would negate the spread received.

if you then scale this up we can say as a FACT you wouldn't have the cash available, which draws us back to this not being a profitable prospect.

 

[arabianights]

well it would do but....

have you really got that kind of cash on the balance sheet (don't feel the need to answer this, it's none of my business, i'm just expressing surprise)

if not, this would mean using your banking facilities - at a cost that would negate the spread received.

if you then scale this up we can say as a FACT you wouldn't have the cash available, which draws us back to this not being a profitable prospect.

If he were to offer non leveraged spread betting then it could only be non leveraged because he had the cash - and he'll have the cash because the client has to deposit it go non leveraged.

Interestingly at this point CMC can then start becoming the most competetive go-to place for shorts - not just retail, but also prospectively institutional. If he can find an institution who wishes to short something his punters are mostly long of, then he can sit there flat and just collect the interest on the cash... it's analogous to collecting a few basis points as an IDB in a total return swap or similar...

 

[PC at CMC Markets]

probably wouldnt be able to do this as spread bet because of no leverage and would not be spread bet, so would have to be cfd and would have to be professional clients so funds can be used to buy products. all hypothetical

pc

arabian, as per recent fsa rulings, client funds cannot be used to cover broker margin by the SB company, and the interest earned on them would be far outweighed by the cost of borrow on the cash they would have to place with their brokers.

and the bigger the product became, the less profitable it would be.

 

[arabianights]

arabian, as per recent fsa rulings, client funds cannot be used to cover broker margin by the SB company*, and the interest earned on them would be far outweighed by the cost of borrow on the cash they would have to place with their brokers.

and the bigger the product became, the less profitable it would be.

If that becomes a serious problem he can move it off balance sheet at very special rates I would think, especially if goldies are a partner

 

[shortsell]

probably wouldnt be able to do this as spread bet because of no leverage and would not be spread bet, so would have to be cfd and would have to be professional clients so funds can be used to buy products. all hypothetical

pc

right, so i was right in the first place - it would not be viable to offer this in a tax free wrapper. good stuff.

 

[arabianights]

right, so i was right in the first place - it would not be viable to offer this in a tax free wrapper. good stuff.

That also assumes the FSA stick to their current rulings. I don't see why in principle they can't change their mind for a product like this. It's very different to using it as margin for a derivative.

 

[shortsell]

I would imagine the argument for it no longer being a 'bet' would be stronger than the argument for allowing the firm to use client funds...

 

[Ross Spur]

Just to bring the thread back to boringly trivial chart matters, how about having the current price highlighted on the Y axis?

 

[shortsell]

sorry, rather wandered off on a tangent. i will cease with my ramblings.

 

[PC at CMC Markets]

yes right but not for the reasons you gave

pc

right, so i was right in the first place - it would not be viable to offer this in a tax free wrapper. good stuff.

 

[shortsell]

actually i'm sorry to be annoying pc, but what i said was exactly accurate.

you couldn't use retails spread betting clients' funds, and it would not be cost effective to use your own. therefore even if th fsa still termed it as a bet, it would not be viable for cost reasons.

you haven't answered that point at all.

 

[arabianights]

actually i'm sorry to be annoying pc, but what i said was exactly accurate.

you couldn't use retails spread betting clients' funds, and it would not be cost effective to use your own. therefore even if th fsa still termed it as a bet, it would not be viable for cost reasons.

you haven't answered that point at all.

Why do you think the FSA would stick to that position in these circumstances? I appreciate they're a bunch of tards, and like all regulators rather obstinante, but there's no rational justification for such a position in these circumstances... and corporate hospitality can solve a lot of problems

 

[PC at CMC Markets]

too tired to go back to your thread and check so I submit yes you are right.
Spread bet is a leveraged product so by de-facto if you want to do a non leveraged deal it cannot be spread bet. This could be run by our lawyers but I think that is what they would say. a bet is a bet.

tks pc

actually i'm sorry to be annoying pc, but what i said was exactly accurate.

you couldn't use retails spread betting clients' funds, and it would not be cost effective to use your own. therefore even if th fsa still termed it as a bet, it would not be viable for cost reasons.

you haven't answered that point at all.

 

[PC at CMC Markets]

hiRoss very quiet on the live client response, I suppose you need more live client responses to form an opinion. your mate gle101 is also very quiet, can you wake him up for me...

pc

Just to bring the thread back to boringly trivial chart matters, how about having the current price highlighted on the Y axis?

 

[montmorencyt2w]

Hi Mike
Thanks for posting. Not likely to have something like that short term. However, you can monitor the markets with your iphone app and close positions or monitor markets if you are stuck in that meeting.

That's a good point.

"Sorry Gentlemen, must take this, important contract at stake ...".

 

[montmorencyt2w]

Here is the list of upcoming improvements to the Charting Package. This work is scheduled to be completed within a month or so.

1. Ability to save chart preferences - Each time a client loads up a new chart it will load with the time frame, chart type and technical tools they specify.
2. When scrolling the time period using the mouse scroller clients will have the option to lock the interval setting
3. Save, Copy and Print Functions - Print function will have the option to print in white.
4. Multiple New Drawing Tools -

Add Text to charts
Vertical Line
Triangles Boxes
Circles/Ovals
Dynamic Line (Set at current market price)
Rotating Arrows
Buy Sell icons
Fibonacci Fan
Fibonacci Arc
Fibonacci Time Extensions
Pitchforks
(possibly more)

5. We are also building in the ability to add drawing tools to the studies section of the chart
6. New Value Box - This will show all values including Open/High/Low/Close, Percentage Change, Change and Technical Levels
7. Extend chart past the most recent data point to create a workspace for predicting future movement
8. New Indicators - Ichi Moko Clouds & Pivot Points
9. Increase Study Options - For example change overbought and oversold levels on RSI and multiple other studies
10. Candlestick Charts based off Bid and Offer Prices (currently only available on the mid price)

cheers Peter

Obviously a huge amount of work gone in Peter, so sorry to be demanding, but how are the tabs getting on (or did you mention that in a previous posting that I might have missed)?