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[Luminox]

Just received this email from S&L:

"Half price Light Crude spreads and new 10p minimum stakes

We have been listening to your feedback at www.shortsandlongs.com and we are delighted to inform you of two exciting developments as of Monday - the start of a new Weekly Special Spread Reduction on a named market and new reduced minimum stake sizes on all financial markets.

For the month of March we will be reducing the minimum stake sizes for all markets to 10p. This will be effective from 7am on Monday, March 1st, 2010 until 9.15pm on Wednesday, March 31st, 2010.

And our first Weekly Special Spread Reduction will see Light Crude, Daily Future spreads cut from 6pts to 3pts and Light Crude, Future spreads cut from 10pts to 5pts (from 7am on Monday, March 1st, 2010 until 9.15pm on Friday, March 5th, 2010).

We will be cutting spreads on a named market each week so make sure you visit our website or read our Weekly Trading Update email every Monday to find out which market has been chosen."


OK, it is a limited offer, but you have to admit that they are trying.


BTW, has "The Goose" retired from this forum?

Good to hear you received this! Yes, Goose has retired from speaking on our behalf.

The alterations were made with the intention of giving clients both the option to protect their capital when trading speculatively in markets unfamiliar to them and as more flexibility available to their existing strategy. If it proves a successful innovation to ShortsandLongs, there's no reason why we wouldn't consider keeping it going longer than just for March.

Feel free to take this opportunity to comment on any feedback you might have about the above changes, i.e. is there something we've missed out that could make this better for your trading strategy?

Dave (Spreadex/S&L)

 

[Jack Hughes]

Good to hear you received this! Yes, Goose has retired from speaking on our behalf.

The alterations were made with the intention of giving clients both the option to protect their capital when trading speculatively in markets unfamiliar to them and as more flexibility available to their existing strategy. If it proves a successful innovation to ShortsandLongs, there's no reason why we wouldn't consider keeping it going longer than just for March.

Feel free to take this opportunity to comment on any feedback you might have about the above changes, i.e. is there something we've missed out that could make this better for your trading strategy?

Dave (Spreadex/S&L)

It's probably been said before, but how about 1pt spreads on DAX, FTSE and EUR/USD, 2pt on Dow, as offered elsewhere?
And maybe an account opening bonus would tempt a few to try?

 

[Luminox]

It's probably been said before, but how about 1pt spreads on DAX, FTSE and EUR/USD, 2pt on Dow, as offered elsewhere?
And maybe an account opening bonus would tempt a few to try?

We do offer 1 pt spread on FTSE & DAX.

...Just not on EUR/USD or Dow. :whistling

It's a good idea. The only danger being the quality of new clients tends to fall when offers are a primary incentive, leading to potentially high churn/poor retention.

 

[montmorencyt2w]

What do you mean by the quality of the clients?

- They are not very good traders, or

- They are under-capitalised, or

- They don't know in what order to use the cutlery at a posh dinner table?


It would be nice to think that you welcome good traders.

 

[Jack Hughes]

We do offer 1 pt spread on FTSE & DAX.

...Just not on EUR/USD or Dow. :whistling

It's a good idea. The only danger being the quality of new clients tends to fall when offers are a primary incentive, leading to potentially high churn/poor retention.

I don't think anyone offers Ipt spread on Dow now (although WS did for a while), but a couple are at 2pt.

Still, this may not concern me as I'm almost certainly a low quality client!

 

[Luminox]

What do you mean by the quality of the clients?

- They are not very good traders, or

- They are under-capitalised, or

- They don't know in what order to use the cutlery at a posh dinner table?


It would be nice to think that you welcome good traders.

Yes, quality as in clients who trade often and consistently, not necessarily those with a passion for fine dining, horses and/or champagne truffles.

Yes, we very much welcome good traders. I could rattle on about how we make our commission from the spread, not people losing, good clients are continued business, etc, but I suspect you’re already aware (please correct me if not).

Clients who only ever open an account with a spread betting firm for the initial offer (and nothing else) are generally considered a poorer quality than those who open an account and go on to trade frequently. Importantly, I’m not suggesting that all of those who join because of an offer will be of a poor quality. I’m suggesting simply that the proportion of those clients is likely to be higher among those prompted to join by an offer alone.

So, in short, yes, we welcome good traders.

 

[Luminox]

I don't think anyone offers Ipt spread on Dow now (although WS did for a while), but a couple are at 2pt.

Still, this may not concern me as I'm almost certainly a low quality client!

To regard yourself as a low quality client, you'd first need to know what is meant by that in this context. Perhaps that's my fault for not explaining!

Considering you post frequently on a forum for traders, I'd hazard a guess that you take a keen interest in financial markets and subsequently see their potential to generate capital from price movements (meaning you're probabaly a high quality of client). It's those who have no real interest in the above and open an account for the offer only, seeing it as a way to potentially make a few bob only that are sometimes considered as low quality.

People who have a passion for trading are the people we're here for.

 

[Sunshine On Leith]

Luminox can I ask if you select your most profitable clients and mirror their trading? Or are you aware of other firms that do this?

 

[montmorencyt2w]

Luminox can I ask if you select your most profitable clients and mirror their trading? Or are you aware of other firms that do this?

Sorry I have posted links to this site before, but if you or anyone have not seen it there are some good interviews with SB company spokesmen (including Spreadex I believe). You have to look around the site for some of them.

EDIT: here is the link: http://www.financial-spread-betting.com/

I think that one of them says that they can make money hedging off the net bets of their clients. Not exactly the same as mirroring their most profitable clients, but similar.


To be honest, I don't see how they can make all their money from the spread.
If the stock market were in a long-running clear bull market and 99% of traders were long in the market, surely the SB company would have to lose....?

 

[Luminox]

Luminox can I ask if you select your most profitable clients and mirror their trading? Or are you aware of other firms that do this?

Good question.

The answer is no. If it does happen, it'd be individual traders working for SB companies and something their directors and the FSA would be keen to know about.

We make our money on the spread by making available the markets clients take an interest in. Why would we risk capital on a client that is not right all of the time when we can rely on something that is (in respect of generating capital)?

It's a good question because it's an obvious money maker to someone with an active mind; same stakes with someone who is right 60% of the time renders you a profit, right? It would if the information you're relying wasn't only retrospectively reliable.

In poker, for example, you know your outs (the cards that can make you a good hand), and therefore you know, based upon a percentage/fraction, the probability of that hand developing from the remaining cards. The Key is that here the outs are fixed; there're 52 cards, two of which you have (in this scenario), and analysis can be applied accordingly.

With a successful client, however, the variables are anything but fixed. There's usually little that can tell us whether they're Warren Buffett’s cousin or some lucky loon. So, it's neither worth our time nor jeopardising our legitimacy as a broker to mirror clients’ trades to make additional money.

What we do do, however, is hedge clients' large positions in the underlying market to mitigate the potential risk of those positions, e.g. if someone has a position open with £10K of associated risk (to us), we'd go short/long (same way as client) using the actual security, meaning that if they make money from us we make it from owning the actual security they've traded against.

Sorry about the somewhat mammoth answer, but that's what you get for asking a good question!

 

[Sunshine On Leith]

Thanks for your detailed answer, its very interesting.

Like the previus poster Ive always just been surprised you guys can make your money from the spread alone, especially in fast moving markets where you would be doing well do get your hedge on within the spread. Especially when very often I notice that the SB firm I use is quoting prices skewed in my favour versus where I see the real market on my bloomberg feed.

 

[Jack Hughes]

Call me cynical, but I can't see that SB providers make their money from the spread, especially now they're almost as narrow as the 'real' market. If that were true then they'd welcome scalpers who make hundreds of trades - but they don't, as we know.

If I ran a spreadbet operation, I'd prefer to have either very bad or very good traders. The first group could just be left to lose money without much need to hedge, the second could be hedged and mirrored in the underlying market.

Regarding account opening offers, I suspect that only a small percentage of new clients ever make a profit, or manage to keep, the hundred quid, or whatever, so it must be worth trying if it brings in a few punters (poor quality or not!).

 

[Sunshine On Leith]

Luminox,

Can you clarify for me please please.

You say you make your money on the spread but then say you only hedge the larger positions.

So therefore surely that means on the smaller unhedged positions you can only make money if the client loses because you are taking the other side of the trade?

I would have thought you can only make money on the spread if you hedge a position therefore crystallising a profit/loss between where the client trades and where you hedge in the market.

If you let a position run unhedged than you will only cyrstalise a profit/loss based on where the client closes the trade?

What am I missing?

 

[Sunshine On Leith]

Luminox do you have a response to my last question please?

 

[Jack Hughes]

I don't think there is an answer.

 

[Luminox]

Luminox do you have a response to my last question please?

If everybody lost on their trades, we wouldn’t have a business (save for the sort of gambler who ignores mathematic probability). If everybody were right we wouldn’t have a business either. It's therefore sensible for us to plan for the outcome that there will be winning and losing trades roughly equal in frequency. The reason it’s sensible to plan for half of all trades as losing is that financial markets are notoriously difficult to trade successfully, and it’s not as if the fact is considered a secret; people know it’s something hard to be good at.

We take on risk to give people the opportunity to make capital gains from their decisions, decisions that can be carefully factored against a field of variables, something completely different to, say, choosing black on roulette wheel where you’re always losing more than half of the time. Clients have the ability to determine whether or not they’re successful and as such we’re regulated by the FSA, not the UK gambling commission.

The main point from all of this (I think!) is that if you were successful on your trades through means other than those prohibited (scalping, etc), we wouldn’t stop you because those who are successful are often equalled by those who aren’t, meaning we take the cut from the spread as a result, therein making money from providing such a service.

Sorry for the late response and I hope that helps!

 

[Sunshine On Leith]

Thanks for your response Luminox.

Just to be clear Im a big fan of spreadbetting as it suits my trading style and personal circumstances very well.

I just find comments like your 'We make our money on the spread by making available the markets clients take an interest in' a bit patronising. Its sales patter as of course you make a fair bit of your money from losing trades.

This isint a dig at you in particular, just Ive heard that line so many times when we know it isint true.

Personally Im more than happy for my provider to make money from my business and if they chose to do that by taking the other side of my trade incase I lose then I dont take it personally. For every losing trade there is a winner in the market, I would actually prefer the winner to be the guy providing me with the liquidity and platfrom to trade rather than someone else in the market I dont know.

i just feel a bit more honesty on this subject would help improve the reputation of spreadbetting firms.

 

[Luminox]

Thanks for your response Luminox.

Just to be clear Im a big fan of spreadbetting as it suits my trading style and personal circumstances very well.

I just find comments like your 'We make our money on the spread by making available the markets clients take an interest in' a bit patronising. Its sales patter as of course you make a fair bit of your money from losing trades.

This isint a dig at you in particular, just Ive heard that line so many times when we know it isint true.

Personally Im more than happy for my provider to make money from my business and if they chose to do that by taking the other side of my trade incase I lose then I dont take it personally. For every losing trade there is a winner in the market, I would actually prefer the winner to be the guy providing me with the liquidity and platfrom to trade rather than someone else in the market I dont know.

i just feel a bit more honesty on this subject would help improve the reputation of spreadbetting firms.

I'm sorry if you found any of my responses patronising - they weren't meant to be!

I hope I have added something more than what you've heard from SB companies in the past. I completely understand how people sometimes feel misrepresented to by salesmen from SB companies and if I've given that impression it certainly wasn't my intention.

 

[Sunshine On Leith]

I'm sorry if you found any of my responses patronising - they weren't meant to be!

I hope I have added something more than what you've heard from SB companies in the past.

Yes thanks and it reflects well on your firm.

 

[Luminox]

Continuing with the context of this thread, S&L's discounted market w/c 15/03 is Silver.

Daily 1pt spread; Fut 2pts.

As always, feedback welcomed.

Have a nice (and relaxing!) weekend everyone.