ETX leading the way around the ESMA ruling.

Synonym

Active member
105 2
Apologies if this has already been posted, but just seen this. ETX have found a workaround to the ESMA rules. Hope some find this useful and certainly hope other SB companies follow suit.

They've launched "Delta" markets.

https://www.etxcapital.co.uk/forex-trading/spreads-and-specifications?spreadbetting

and what this means for margins. Check the tweet from below account of 4 Aug (currently the pinned tweet at the top of the account), showing a reply to an email asking for further clarification.

https://twitter.com/KevinCBurton


Syn.
 

tomorton

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From the ETX email, aren't they just offering options? That's always been an alternative to SB and CFD's.
 

Synonym

Active member
105 2
From the ETX email, aren't they just offering options? That's always been an alternative to SB and CFD's.
Basically it's spreadbetting on options. I don't think they used to offer that, i may be wrong? IG offer this too. I'm sure they didn't offer it in the past..?
 

Synonym

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Liquidity in options trading is a serious risk, just looking on IG , who also offer SBing on options. The spreads are wide and there is no indication of liquidity whatsoever.

I bet you could easily get killed trading options in this manner.
 

tomorton

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This is odd. A spreadbet on a financial underlying is still a spreadbet, no matter what the underlying is.

ESMA has used this definition of CFD's, including SB -
"3. A CFD is a derivative other than an option, future, swap or forward rate agreement, the purpose of which is to give the holder a long or short exposure to fluctuations in the price, level or value of an underlying, irrespective of whether it is traded on a trading venue, and that must be settled in cash or may be settled in cash at the option of one of the parties other than by reason of default or other termination event."

I guess we can only wait and see how this goes with the FCA.
 

Synonym

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Agreed. Also IG even goes so far to say on their own forum that trading betting on an option with them is to trade a CFG.
 

Synonym

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The spread on these can be very expensive. On IG now, a Sept Call on the SPX, Bid = 29.77 Ask = 31.97. Min size = £10 per point, a point being the difference between 29.77 - 29.78.
 

Synonym

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Plus, they despite buying of options being a cash transaction, they take the premium and but also wnat the margin from the underlying market. So betting on options is much less reflective of actually trading the underlying than spreadbetting a future/stock is.
 
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Splitlink

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10,850 1,232
It is all very complicated for this trader! These brokers are always going to introduce some complicated trading arrangement to circumvent new rules. It has to be simple, or it's dangerous. Me, I'm staying with straight spreadbetting in the traditional way. If it is with smaller stakes and fewer trades open at a time, so be it.
 

Synonym

Active member
105 2
It is all very complicated for this trader! These brokers are always going to introduce some complicated trading arrangement to circumvent new rules. It has to be simple, or it's dangerous. Me, I'm staying with straight spreadbetting in the traditional way. If it is with smaller stakes and fewer trades open at a time, so be it.
I understand and certainly agree with the simple is best approach. Betting on options doesn't look good. But to me neither is betting under the new ESMA rules. With the margin req, the spreads and the way the spreads can widen greatly after hours/at open (meaning i'd never leave a physical stop on a spreadbet), i think the leverage is poor and the risks too high. Better trading the options themselves.
 

kalott

Established member
677 57
It is all very complicated for this trader! These brokers are always going to introduce some complicated trading arrangement to circumvent new rules. It has to be simple, or it's dangerous. Me, I'm staying with straight spreadbetting in the traditional way. If it is with smaller stakes and fewer trades open at a time, so be it.
"Current ETX Capital Wall Street price: 24733
Wall Street Delta contract offset: 15000
Wall Street Delta contract price: 24733 - 15000 = 9733

The contract will move in exactly the same way as its underlying contract, for example if the Wall Street contract falls 50 points then the Delta contract will fall 50 points."

seems the only difference is that the margin is 5% of 9733 instead of 24773?
 

Synonym

Active member
105 2
"Current ETX Capital Wall Street price: 24733
Wall Street Delta contract offset: 15000
Wall Street Delta contract price: 24733 - 15000 = 9733

The contract will move in exactly the same way as its underlying contract, for example if the Wall Street contract falls 50 points then the Delta contract will fall 50 points."

seems the only difference is that the margin is 5% of 9733 instead of 24773?
Hopefully so. As i mentioned above, awaiting a response from ETX, but IG take the margin of the full underlying when you spreadbet on buying an options, this is because they don't actually take a position in the options market, but make a synthetic one in the futures markets.
 

Synonym

Active member
105 2
"Current ETX Capital Wall Street price: 24733
Wall Street Delta contract offset: 15000
Wall Street Delta contract price: 24733 - 15000 = 9733

The contract will move in exactly the same way as its underlying contract, for example if the Wall Street contract falls 50 points then the Delta contract will fall 50 points."

seems the only difference is that the margin is 5% of 9733 instead of 24773?
As suspected, these ETX markets do work in that way.

IG as of yday introduced their own markets. Called Knockouts. They trade just like options and so you can use in a way to make the max loss and margin req lower than those generally of the of ETX DELTA. Look pretty good. I may start using them again. Here's the link.
https://www.ig.com/uk/help-and-support/spread-betting-and-cfds/market-details/what-are-knock-outs
 

tomorton

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Thanks Synonym. Some unexpected results from ESMA's half-witted regulations.

But these Knockouts don't sound such a great deal from the margin point of view. Knockout margin on the FTSE100 is 1:36, ESMA SB margin would be 1:30, so not a huge advantage there.

Plus, like a guaranteed SL, you can't adjust the Knockout level once its set, one major reason I never use GSL's.
 

Synonym

Active member
105 2
Thanks Synonym. Some unexpected results from ESMA's half-witted regulations.

But these Knockouts don't sound such a great deal from the margin point of view. Knockout margin on the FTSE100 is 1:36, ESMA SB margin would be 1:30, so not a huge advantage there.

Plus, like a guaranteed SL, you can't adjust the Knockout level once its set, one major reason I never use GSL's.
Where did you you find the margin req Tom? I can't find that. No, you cant adjust the SL once set, but i find given the way the spreads blast wide open during the before hours or at the open you can't afford to have and SL sat in the market. Have you not found the same? Perhaps it's just the markets i'm trading.
 

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