Spreadbet bias - true or false

NickW

Junior member
47 0
Can anyone say for certain that it is a fact that the spreadbet companies use a bias on their prices?

E.g. if the SB Companies S&P future spread is 0.5, does this mean that if the real bid/offer is 900.0/900.1 then the SB bid/offers for the same price could be anywhere from 899.5/900 to 900.5/900.6? Assuming they restrict this type of bias to within their spread.

If this isn't what is meant by SB bias then what is? Or is it that as they are marketmakers they make up any price they like and serve it up?

Because I've been believing that there is a bias of some sort I've been using larger stops than I'm comfortable with.
 
Last edited:

jpwone

Well-known member
254 3
Hi

check out http://www.tradingspreads.com for a couple of examples of SB bias.

The bottom line is that the SB company is the market maker for their clients and can (and do) quote any price they like.

Examples of bias can be seen daily if you trade the Dow Cash. The SB quote will usually be higher than the actual in a rising market and lower in a falling market. This can be anything from a couple of points to 20 or more points away from the actual ie. they bias there prices in line with their view of where the market is going. The danger with the bias is that if it is biased up and you buy (go long) and the market turns down and the SB company changes their bias to a down bias then you can be sitting on a significant loss even though the market has only moved a few points against you.

Understanding the bias and recognising when it is favourable to trade is a key part of spreadbetting.

HTH
 

NickW

Junior member
47 0
Hi HTH

Thanks for your reply - I'll check out that link.

One thing I can let people in on if they didn't know already is that the SB cash prices will definately not be the same as the index cash price. This is because their cash prices are actually based on the future price but adjusted for fair value dynamically, which is based on dividends and interest. In non US trading periods the SB co's also use things like ADRs and how US stocks are trading in currently open markets elsewhere. The cash price will always be an estimate.

I would guess this is so that all bets can be hedged in the markets. There's no practical hedge for the cash index, other than buying or selling every stock in the index, which is why it is based on the futures which are hedgeable.

Therefore I guess I should restate my question as is there a bias in the SB Futures prices, because I know the cash prices don't match with the real price due to the explanation above.

BTW I'm no insider wiz, but I had this explanation given to me by the head trader of a SB company.
 

dsmodi

Established member
509 2
nickw,

1.HTH = Hope That Helps, which is what John was alluding to (i hope)... and john = jpwone.

2. yes - i'm sure there is a bias to SB futures price. If mkt is flying up, they can, and do, easily increase their bias further in their favour. Although, the underlying price is based on the futures.

FWIW , HTH, and of course all IMHO

:)
;)
 
Last edited:

Tray_Dar

Junior member
24 0
What I've noticed is that IG Index will always bias in the direction the market is currently moving. However, D4F will bias in the opposite direction if the market is moving towards a sup/res level. This makes it difficult for s/r traders as they are always 'catching up' with the price.

This can be favourable if you play breakouts as you can get in while the price is in your favour and as soon as the breakout occurs the bias is swung in your favour putting you in profit. Ofcourse easier said then done.
 
Last edited:

mmillar

Guest
330 5
I don't know why I'm always defending the Spreadbet companies but here goes again...

I think the idea of spreadbet companies quoting prices 20 points out of the market is just plain silly. If they did I (and plenty of others) would be arbitraging them to death. It would be easy, risk free money.

I took an S&P futures feed from the US a while ago to see if all this talk of them changing prices were true. The S&P futures feed and D4F's S&P price were EXACTLY THE SAME, tick for tick.

I believe all this is just down to a lack of understanding of what you are trading when you spreadbet (ie. there isn't really a 'cash' price, just a futures price + x) and the usual 'blame the broker' syndrome.

Just my humble opinion. :)
 

NickW

Junior member
47 0
Having been on a SB trading floor I'm sure there's no manipulation done by the traders. They are just order fillers. I can see that is possible that the quote engine biases the prices based on momentum or perhaps where the stops are, if it can reasonably get away with it.
 

Riz

Experienced member
1,266 5
They are all biasing the price whicever way the market moves, apart from the usual trick of anticipating turning points and making life difficult for those trying to get in/out... and if all this doesnt help enough cmc will requote you while FINS delaying your quote, one last thing if you're a marked trader your orders will rarely go through auto...

Riz
 

delboy trotter

Active member
112 2
Have to agree with mmillar on this one. In my experience using a real time feed of S&P Futures (ES H3) from eSignal and compare this to D4F Dow30 Cash. It is identical tick for tick. Only today, there was a situation where the difference in the D4F price and the actual Dow 30 cash price ($INDU), had a so called "bias" of almost 20 points. This is a fairly common situation. My question is this. Do all the SB firms use the S&P Futures to set their prices or are there some who use the Dow cash instead?

db-t
 

madasafish

Well-known member
470 5
IG and City S&P prices straddle the S&P futures price.. Exactly
Fins bias.

Dunno about others.
 

sidinuk

Established member
624 5
MMillar is right.

I think the problem that people are having is that they are comparing the cash index to the SB quotes. The SB quotes are based on the relevant underlying futures market not the cash market. Futures move quicker than the cash index (it takes time for the cash market to catch up, as the underlying shares that make it up have to trade to move the index). The futures prices will always move a little further in any direction than the underlying index because it will have more momentum.

I have looked at the differences between D4F, cash index and futures prices for the S&P500. Between D4F and the index you will lose around 1 pt per contract, but between D4F and the near ES contract the difference over a contract is only .25 points. Now D4F quote a spread of .5 pts and the ES is .25 pts, so there's the difference. D4F and the futures move exactly together, the only difference is a wider spread. Other SB companies use considerably larger spreads and aren't worth using at all because of that.

You need to offset the bigger spread with the SB's against the tax benefits. Anymore than 1 or 2 trades a day and that tax benefit won't be big enough to pay for the increased spread.
 

mmillar

Guest
330 5
And while I'm doing my Spreadbet Defender bit...

Riz said:
... if you're a marked trader your orders will rarely go through auto...

Riz
This just sounds like paranoia to me. The questions is Why? Why would a spreadbet company 'mark' certain people and stop or slow their orders?

Spreadbet companies make their money on spreads not trading against us. When we place a trade with them, they place it in the market. They are not bookmakers, they are brokers. They make money when we trade - it is irrelevant to their profits if we have a winning trade or a losing trade. It is therefore in their long term interests for us to make money and to continue to trade.

Again, just IMHO. :)
 

madasafish

Well-known member
470 5
If you try to trade with Fins at a market turn or when the price direction is uncertain, you will be held for up to 1 minute. IF there is no bias, why? No need to hold, just oput you in at a price.

IG and City give you continuous quotes AND will fill at those quotes. Fins will not (and from what I read and hear) D4F wiill not.

Explain that if no bias!
 
AdBlock Detected

We get it, advertisements are annoying!

But it's thanks to our sponsors that access to Trade2Win remains free for all. By viewing our ads you help us pay our bills, so please support the site and disable your AdBlocker.

I've Disabled AdBlock