SB Bias!


Well-known member
Does anyone knows a way of overcoming the opening bias that an SB company marks up/down the indices by.

Sometimes it can be around 30 to 40pts on an index especially the Dow.

Is there an SB company or broker whose spread is not so wide on the open price?

Any advice much appreciated.
As u may know the cash is not traded on the open mkt or exchange- it is only the future -

But SBs do offer cash index trading, except that it is their interpretation of the cash ( using the futures) to give them an indication-

Therefore, any system based on the open of the Cash mkt is not really practical-

I would say, u are going to find the discrepency, whiever SB u use- But i could be wrong !!
If I understand the question correctly (and I'm a relative newbie, so it's quite possible I haven't) you're looking for a SB that doesn't make an untradeable spread on the indexes?

I use IG Index and although their 'version' of the cash price may not always be in line with the 'real' cash price, it does move pretty much in line with the underlying.

IG offer a zero bid/offer spread with a 4 point commission (6 for controlled risk).

Hope this helps.
Thanks for that guys.

I'll have a look at IG index spreads and see how much they differ.

I notice that the Deal4free and finspreads don't take any trades on Eurostoxxe until 10 minutes after the markets open- I wonder why!!
"Does anyone knows a way of overcoming the opening bias that an SB company marks up/down the indices by."

This is my understanding:-
A SB company is basically a single market maker operating their own rules. They have to protect themselves first thing from a potential flood of orders in one direction, just like many market makers do for equities.
Most SB co's do not hedge the positions they take on, because it is an expensive thing to do. I know of only one which does hedge (Cantor), and their spreads generally appear to be wider then the rest. The rest are effectively gambling against you, and, in the case of the open, making it more difficult for you to beat them at a time when they don't know what orders will come in.
There is nothing you can do to overcome this except
1. as you say, find a company with smaller spread or bias
2. or don't trade the open :)

I don't know whether Cantor skew or widen the spread at the open. Perhaps others might know.

for narrow spreads and real prices- trade futures

for wide spreads, but low bet size opportunity - play with spreadbets
"for narrow spreads and real prices- trade futures "

I trade the Eurostox50 futures and very often the opening spread is 6-8 times bigger than the intraday spread.
What is even more interesting is that this index is supposed to be totally electronic !!
Nothing good is ever easy :)
Rglenn, hi again.

I use LiveCharts so if you watch the mini-Dow (CBOT:YM03U) there will be no initial gap because the SB firm (ie CMC) mirrors the futures price of the Dow from the Open.

Also at the Open the actual Dow index moving up or down to meet roughly the level of the SB price can give one a misleading visual impression.
'Also at the Open the actual Dow index moving up or down to meet roughly the level of the SB price can give one a misleading visual impression'

Fudgestain that is exactly the situation I have found myself in sometimes as I find that there are a few times when the market reverses just before the index reaches the SB prices and at other times it passes it by quite a number of points.

This doesn't void my system but it makes it a bit more difficult to achieve my expected profits within a certain time frame. i.e if a couple of these 'gap' openings go against me then it could cost me a few more days in trading before my expected profits are realised.

As you know I am always looking for ways of improving my trading.

do you trade futures through a futures broker and with an electronic trading platform?

the estox50 is 100% electronic though Eurex - what did u mean by "supposed to be electronic"?
Even though an exchange is all electronic such as Eurex (but not SB companies), it is more than possible that the trading is so fast at the open that the spread widens because there is a lack of people wanting to trade at certain prices or all the orders at those prices have been filled or pulled. I dont think that it means there is anything suspicious going on and in some cases offers an opportunity.

I trade through IB using TWS.
What I meant was that big opening spreads make me suspicious that there is human intervention, despite it being supposed to be entirely electronic.
I can understand why a MM would want to set up some protection at the open, but if there are no MM's, then why a wide spread specifically calculated by the electronic system ?
If there is a dearth of orders during the day, the spread is never altered to attract business.
In fact I wonder why there need to be a spread at all. Just as with OEIC's there could be one price to buy or sell at. The spread is there traditionally to allow the MM to make a turn on every trade. So if there are no MM's where does the profit from the spread go ?
Anyway, I'm straying from the subject. Just saying that opening spreads can also be a problem with futs.

You may well be right, I don't know. What I do know is that something somewhere calculates a wider spread at opening gaps, presumably based on some kind of logic.
As a wild guess, it could be that the futs spread profit is used to finance the operation and maintenance of the electronic system and the wider opening gap spread is simply a vehicle for protecting that income.

I'm open minded, but always suspicious :)


the spread is simply the difference between the ask and bid that traders are willing to trade at - and apart from computer generated, arbs, risk based or outright trades, its all human directed - its not all computers trading between each other out there!

a long shot - but were you looking at an expiring or far out contract or even the estoxx contract on another exchange apart from eurex - u can choose a number of different exchanges and expiries for the estoxx on your IB TWS?
Last edited:
SB bias...

SB "bias" is a theme that seems to crop up regularly. Let me give you an insider's view.

I work for one of the major SB companies. When we make a quote on the dow cash we calculate it from the futures price, minus a likely "fair value" reflecting dividends and cost of carry. We never ever EVER go around the cash.

Most of the time this doesn't matter too much, as the cash is pretty well behaved and will tend to trade at its fair value to the futures. HOWEVER, during the first 15-30 minutes of the day, the cash market is a nonsense number. This is because it is the running average of a bunch of stocks, some of which are not yet open, and therefore not yet tradable, and therefore don't yet have a meaningful price. So you can never trade "the cash" at this time of day, whether you use a SB firm, a basket trading progam, or whatever.

To give an example: the dow closed at 9400 yesterday. Today Microsoft comes out with a profit warning, and is expected to open significantly lower, pushing the market down 100 points or so. The futures markets will factor this in, and therefore so will the "daily dow" quote of every single spread betting bookmaker. When the cash starts trading, it will do so at around 9400. It will stay around 9400 until Microsoft opens, feeds into the calculation and causes the market to dive instantaneously to 9300. Everyone knows the fall is coming, but nobody can trade it, as to trade it would require the ability to sell MSoft at its pre-profit-warning level.

So offering quotes around the cash would be a quick way for bookies to go broke (no bad thing, you might argue). I have seen one occasion on which one of the newer companies tried this, presumably through ignorance. We laughed until we were sick, then sold the hell out of their quote, as did their fortunate clients. They never did it again.

The purpose of any "Daily Dow" quote is to predict the closing level of the market that day, ignoring all the shenanigans inbetween. We can and very often do get this wrong... ...but we'd get it wrong far more often if we took any notice of the cash index during opening periods, sudden moves in the futures markets etc.

There are no free money trees in finance, I'm afraid.

Apart from being a bookmaker, that is ;-).
Thanks for the insight Probookie. This subject is dear to my heart and forever giving me headaches.
How long after cash starts trading does MSFT and other majors like Intel start trading ?

great that you took the time to explain a subject that runs and runs...... in part because speadbetting companies introduced the concept of trading the cash with a cash index - which as you said is in fact just the futures price minus an amount for fair value

of course there are a number of ways of defining fair value and in trading real futures - real fair value - is key as a guide to market direction and sentiment, but that is different to the daily calcuable fair value

the other thing that pops up is price "flipping" - and all that is is the futures price moving from the ask to the bid (or vice versa), and the effect being exagerated by a change in "real fair value" and then by the wide spreads of the spread betting companies (wide as in wider than futures)

most stocks open on the floor of the nyse within 5 mins of the open, but one or two can delay, as they have to make sure their books are balanced with all the opening trades and since there are only 30 in the index, this can obviously affect the cash price, but futures will seek the right level - albeit with volatility due to the low volumes of both the mini and the floor contract - but of course futures will frequently appear to get it wrong, but this is only because the last price posted is just where the last price took place and may not be where the bulk of the real positions were taken

it is possible to take advantage of mis-pricing of nyse stocks at the open due to rules for retail traders, but its hit and miss and wont make you a fortune

i think that when u said -

"So you can never trade "the cash" at this time of day, whether you use a SB firm, a basket trading progam, or whatever."

- you mean that there is no way of taking advantage of so called cash pricing ever as opposed to just at that time of the day - but you meant the real cash price and not the spreadbettors version -since as you say the spreadbettors version is just the futures minus fair value anyway

add brokers, market makers, and specialists to the "free money tree list"
Welcome probookie,

Good to have an insider's view on this subject, which seems to come back to haunt us regularly on this board. I have some other questions for you, that you might not wish to discuss publicly. Perhaps you could email/pm me.


Dow stocks come in gradually during the first 5-10 minutes. They're usually all going within 10-15 minutes of the opening.

However, if there's a stock that's just had a major announcement (say, a profit warning, or a takeover bid), its opening can be delayed - perhaps by as much as 30 minutes. The reason for this (I think) is that the pro market maker on the floor of the NYSE has to sort out a fair matching price for an avalanche of "market on open" orders before he can report the first trade.

So if you see the bookies' daily Dow prices away from the cash by more than 10-20 points at this time of day, that's the explanation.

The only other time you should notice a major discrepency is when the futures have just jumped/dived in the aftermath of, say, an FOMC interest rate decision. As discussed, everyone's Daily quote runs off the futures, as the cash moves far too sluggishly to be of any use under these circumstances. Again, this is down to the fact that 30 different NYSE market makers have to have reported a trade, post-announcement, before the cash can be said to reflect the true post-figures economic reality. This tends to take a minute or so.


Feel free to question me in public; if you've got a few SB queries I'm sure a load of other people share them. I shall remain mysteriously quiet with regards to anything that might be commercially sensitive/libellous to various SB companies etc...
"the spread is simply the difference between the ask and bid that traders are willing to trade at"

But the traders don't move the spreads. With an electronic futs exchange, everything is controlled by computer including the spread. There are no market makers, just traders and a computer system offering prices and taking orders.
The traders simply decide whether to accept the prices offered or not.
It's just that sometimes e.g. the opening gap, the behaviour of the spread is very similar to a real human MM, and just makes me wonder why.

"its not all computers trading between each other out there!"
Having re-read my post I can't see anything which suggests I was thinking that.

"were you looking at an expiring or far out contract ......"
I always trade the nearest month's contract through Eurex.
Other contracts are too illiquid for my way of working.