Hi Lovejoy and Blackswan.
I would say that your analysis is probably correct about spread betting on forex. I have never done the analysis myself but there is a lot of truth in what you say. However, I think that this type of analysis does not apply to our next gen platfom. I know you are thinking, I knew he would say that. But if you look at my previous blogs sorry posts you will see that we have set up our next gen platform as a high frequency trading platform built by the ex-head of Goldmans who built their ready platform (along with others). The team that has built next gen for spread bet (and cfds) have built it in a way that we can compete with exchanges and ECNs. We see Exchanges and ECNs as the competition, not other spread bet firms. Obviously at the moment our spread bet spreads are not as tight as an ecn for forex but then we have to build into the spreads the spread bet tax and in non forex products exchange fees, commissions etc. It has to be an all inclusive price where as ecns and exchanges offer a net price with commissions etc added on.
I am here posting these messages because I want to get across to the spread betters that next gen spread bet is a different level. It is not about head line spreads, it is about execution, technology and precision pricing. I believe that we are there with the execution technology but need to tighten up the commercials a bit with tighter spreads and that is coming. It is all about getting the technology right for tighter spreads on no requotes, no fill or kill no ticket time outs, no dealer referrals, filling the ticket every time. some more work to be done but it is coming and there will be tighter spreads.
I have to say that i do not believe that the spread bet industry will exist in it's present form, in the next couple of years. Competitors will have to follow what we are doing because of the higher standards of execution, precision pricing, no requotes etc. and tighter spreads. I have looked at all competitors technology, across all the products and I see no body with the technology that we have developed. It is very high level and will get better. The aim for all spread bet firms is to compete with ecn's and exchanges and make it viable to trade any financial product as a spread bet without pricing latency, execution latency, precision pricing etc. That is achievable but it is only achievable through technology. If you do not have the technology then you will not be able to compete with ecns, exchanges and CMC Markets. We made that commitment over one year ago and we are now delivering the technology that will lift the spread bet industry. it is still early days but i believe one day all spread betters will work this way. you heard it here first.
cheers peter
