As it was explained to me by an SB director himself, they do make their money off the spreads and also what was said earlier - by hedging in the markets.
In a sense you're indirectly trading in the markets via a middleman who only goes to the market when he has enough orders/needs to. Otherwise they have enough capital to handle most daily orders like a bookie (my interpretation, not his words).
They're governed by the FSA so they can't really scam you and besides it's not in their interest to do so. How long do you think they could do that before they were shut down anyway? I've got several SB accounts now but when I first started I had confrontations with nearly all of them for this very reason
- bit of a hot head me
(even got transferred to said director one day during a complaint call and then accused him of stealing my money as well!) Afterwards, when I thought about it and went over everything he had told me I felt like a right tw*t.
He was absolutely right and I didn't have my figures correct.
I think people like to blame someone when they lose (it's human nature) but the SB companies keep very comprehensive records of every transaction - just look in your account history, it's all there.
One thing you should watch out for is the spread changing (which is does sometimes, especially on stocks - this is a sore point for many because they do it without any warning and this can affect your stop and other orders). Personally I avoid day trading these instruments but if you're not day trading, exact levels don't really matter anyway (it's only ever a couple of points wider when it happens). Also the prices on the platform and the charts they provide don't always tally (latency?) so it's best to base your orders on their platform prices rather than their charts (although most the time they do tally and very rarely go out of sync - just something to keep in mind). If in doubt best to have an independent chart ready from another source if you're trading off a chart (just remember SBs trade at a premium to cash market like futures do).
They base their prices on the futures markets and follow these. Not the cash markets - even though they offer a daily cash instrument. Guess this simply means their prices are always at a premium to the cash markets (although never noticed them at a discount before...)
The spread is a right pain though as it makes some strategies impractical but what you lose on the swings you gain on the roundabouts.
ANOTHER TIP: Sometimes when the markets get really busy (like at the UK and US open) the platform seems to slow down (latency) and it doesn't respond very well. Sometimes you even lose connection. Their advice is to clear your internet cache regurlarly (Internet Options for IE regardless of the browser you're using). I've found the best browser is Google Chrome. Other than that, just pack as much RAM as your system will take/you can afford.
