SB Brokers' honesty

[John26]

All,

I’m UK based. I am considering spread betting, purely for tax purpose and trading ease (trading from a platform directly rather than brokers web browser.

One think I need to go passed, is ensuring that I am comfortable with various aspects of the SB broker that I choose, mainly ease of use, costs (being last on the list if all else is good) and platform ergonomics, but also honesty and etiquette. And this is where I stumble... Looking at reviews, it would appear that a lot or SB brokers lack transparency and honesty: platform going down, re-quotes, people having problem withdrawing funds, slippage...

I find it hard enough fighting the market, but if I have to fight the broker as well, I wonder how worth this whole business is. I currently swing trade mostly, but also day/scalp occasionally. I am not overly interested in the leverage side of SB. I am more on the cautious/conservative side and I don’t feel the need to put my hard earn cash "+" on the table to make big wins so perhaps SB is not for me. But as I said, costs seem to be less (Stamp Duty is a killer- CGT is a pain).

What are your thoughts?

Cheers.

 

[tomorton]

Go with a UK-based "high street" name, not some new bunch based in a back street in Northern Cyprus.

But really, your bigger problem will be trading well.

 

[luckystrike23]

Going with famous high street names is not always wise as I've found they can be arrogant to say the least. Just stick to UK FCA regulated outfits who really want your business and you should be okay if you don't scalp them.

 

[John26]

Going with famous high street names is not always wise as I've found they can be arrogant to say the least. Just stick to UK FCA regulated outfits who really want your business and you should be okay if you don't scalp them.

Thanks guys.

Lucky strike, you say don't scalp them... Don't they like scalpers then. I will be mostly swing trading but occasional day trade indices if there is volatility and a few bob to be made. Should that be avoided? How long should I hold intraday to not be regarded as a scalper?

Chhers.

 

[tomorton]

If you're scalping, which isn't really a problem to the SB firm, it can look like you're arbitraging, which is. That is, running two accounts with two different SB firms and trading the difference between the two quotes. Very quick trades not associated with news announcements or other specific volatility might be classed as arb trades and the SB don't need to prove that's what you're doing, they'll just close your account.

Do be aware, most of the trading literature and web articles are aimed at the US market, where financial SB basically isn't permitted by law, whereas some UK sources describe SB firms as brokers, in the US and conventional sense, which they're not: they are bookmakers like Coral or William Hill. That's not to say that SB firms are inherently dishonest or brokers are inherently trustworthy - if you can trade you can trade, if you can't trade its not the firm's fault.

 

[John26]

Thanks guys, very helpful. I have a couple of questions in terms of choosing a sb firm based on criteria that I have on my list following research that I did over the weekend. I think it is best I create a new thread for this however - Feel free to jump it

 

[luckystrike23]

Scalping and arbitrage

 

[John26]

Thanks very interesting.

 

[highbury fx]

If you're scalping, which isn't really a problem to the SB firm, it can look like you're arbitraging, which is. That is, running two accounts with two different SB firms and trading the difference between the two quotes. Very quick trades not associated with news announcements or other specific volatility might be classed as arb trades and the SB don't need to prove that's what you're doing, they'll just close your account.

Scalping is a problem to SB firms. It is less of a problem to STP firms than it is to B book firms but it is still a problem for both. The STP firms will not lose money from scalpers as all their deals are hedged but they will suffer relationship problems with their liquidity providers which can cause pricing issues for the clients that don't scalp. The B book firms have a problem with scalpers as they lose all the advantage they have with the spread by being offside immediately.

 

[tomorton]

OK, that sounds convincing.

Actually, if SB firms push the scalpers out I think they're actually doing them a service - I'm sure most were going to lose their money very quickly anyway.

 

[gle101]

In my point of view the overall honesty of the market makers have decreased, and I see this as a result of the incredibly fierce and growing competition that exist today, not necessary they are at the core dishonest. It is understandable, it is not easy to compete these days, this when a new competitor is appearing almost each day ready to take market share from them by claiming unsustainable promises to the trader.

 

[highbury fx]

In my point of view the overall honesty of the market makers have decreased, and I see this as a result of the incredibly fierce and growing competition that exist today, not necessary they are at the core dishonest. It is understandable, it is not easy to compete these days, this when a new competitor is appearing almost each day ready to take market share from them by claiming unsustainable promises to the trader.

you make a good point.

its the perception of how honest brokers are that is the problem not necessarily how honest the majority of us actually are.

being regulated in multiple jurisdictions (like my firm is) is terribly difficult to stay on the right side of the line. Not because we want to skirt around the grey areas or interpret guidelines in a bullish manner but because there is always so much to make sure you are on top of and doing correctly. it quite literally is all consuming and the highest priority of any sb/cfd firm now is to remain in control of the corporate governance and ensure that our businesses are operating in the way the ever changing regulatory landscape obliges us to.

smaller newer companies who struggle to get clients may interpret the guidelines a bit too generously and get themselves in a spot of bother. the very worst ones will refuse to call it a day and instead dip in to client funds.. like most directors of an FCA company i would rather chop my hands off than use segregated client funds to shore my business up.

you made a point on another thread gle that you and i were chatting on that once a spreadbet firm has identified you as someone they want on their watch list its very hard to get off the watchlist and that's because the reputation of the client has been formed. its the same with the sb industry, some really aggressive firms have entered our space in the last few years, mainly from Israel, and have damaged our sector because there is now a shady reputation attached to anything to do with FX or CFDs or affiliates and that's really unfortunate because quite frankly most of us just want to do as well as we can during our working day and then go home and be normal family people. we wouldn't think about setting ourselves up to rip people off, we have too much of an advantage with the spread to resort to underhandedness. we shouldn't have to resort to the final days of the worldspreads and mfglobal collapses when they were offering spreadfree trading - its too contradictory, we are after all spreadbet firms and believe it or not most spreadbet firms still make most of their money from the spread than from the B book losses.

saying you can be trusted is all just words until you have consistently shown yourself to be a standup firm but in the meantime you have so many new entrants who unfortunately aren't all they seem to be and doing things they shouldn't be doing and saying things they shouldn't be saying. its no good the industry saying to people trust us, trust us when it isn't backed up with trust worthy evidence. rest assured though the vast majority of fca regulated spreadbet/cfd companies can be trusted to be a fair trading partner, its just difficult to prove that in an industry where so many of our clients will lose money to us.