Spreads to widen

[Nut]

I have just been advised that spreads with all of the major SB's are to be widened dramatically in the very near future.

It seems the perceived risk because of the credit crunch is the reason.

Those with GFT need not be concerned I have just asked the question and their spreads are to remain stable, it seems this was decided in a meeting last week.

Lets wait and see what happens

Nut

 

[donaldduke]

Really doubt this...

The spread betting companies are loving the volatility.

They are printing money at the moment, even more than they normally do..

 

[tomorton]

Finspreads have been advising for at least a week on their site that they will be making changes to their equity margining rates from 03/04 due to exceptional market volatility.

 

[shadowninja]

In a meeting? Heads of all the big, rival SB companies got together to decide this? I doubt that... it doesn't happen in any other industry... plus isn't it called price fixing by any other name? Happy to be proven wrong, of course.

 

[ns1000]

I have just been advised that spreads with all of the major SB's are to be widened dramatically in the very near future.

It seems the perceived risk because of the credit crunch is the reason.

Those with GFT need not be concerned I have just asked the question and their spreads are to remain stable, it seems this was decided in a meeting last week.

Lets wait and see what happens

Nut

Pretty sure you're confusing spreads and margin requirements. Increasing spreads will not reduce the credit risk, although it may lose business. Most SBs have increased margin rates though (in common with exchanges and CFD shops)

 

[Nut]

In a meeting? Heads of all the big, rival SB companies got together to decide this? I doubt that... it doesn't happen in any other industry... plus isn't it called price fixing by any other name? Happy to be proven wrong, of course.

No not all of the SB's were in the same meeting, sorry for my lack of clarity. This was a meeting at GFT during which the decision not to widen was taken.

Nut

 

[Nut]

Pretty sure you're confusing spreads and margin requirements. Increasing spreads will not reduce the credit risk, although it may lose business. Most SBs have increased margin rates though (in common with exchanges and CFD shops)

we shall have to wait and see if it's spreads/margins or both, the information given to me was spreads.

Nut

 

[atrim]

In a meeting? Heads of all the big, rival SB companies got together to decide this? I doubt that... it doesn't happen in any other industry... plus isn't it called price fixing by any other name? Happy to be proven wrong, of course.

My X-GF used to work at Arthur Anderson in HR. The HR Directors of the big firms used to get togethor to discuss salaries. I would not be surprised if SB firms talked.

 

[ns1000]

My X-GF used to work at Arthur Anderson in HR. The HR Directors of the big firms used to get togethor to discuss salaries. I would not be surprised if SB firms talked.

Spreads are de facto dealing charges. If they were to form a cartel and agree them, it would be seen as price fixing, and illegal.

Would be very surprised if this rumour turned into fact.

 

[Nut]

Spreads are de facto dealing charges. If they were to form a cartel and agree them, it would be seen as price fixing, and illegal.

Would be very surprised if this rumour turned into fact.

Well hopefully I am wrong

Nut

 

[arabianights]

Pretty sure you're confusing spreads and margin requirements. Increasing spreads will not reduce the credit risk, although it may lose business. Most SBs have increased margin rates though (in common with exchanges and CFD shops)

But if markets are more volatile then they'll find it much harder to hedge their big clients due to slippage... hence more spread needed.

 

[ns1000]

They're more likely to limit the size the quotes are tradeable in.

Increasing the headline cost in tantamount to suicide.

 

[shadowninja]

They're more likely to limit the size the quotes are tradeable in.

Yes, this would make more sense as a business.

 

[arabianights]

Yes, this would make more sense as a business.

Only on the assumption that small traders will all lose money... you can't really hedge them without prohibitive costs. If I spread bet I'd personally rather trade with someone who isn't going to go bust, even if it means slightly larger spreads.

 

[LION63]

I have just been advised that spreads with all of the major SB's are to be widened dramatically in the very near future.

It seems the perceived risk because of the credit crunch is the reason.

Nut

NOT SO. Margin requirements are to be widened next month by a few of the spreadbetting firms and they have already written to clients to inform them of the changes. One of the first to do so was City Index and CMC were quick to write to clients informing them that their margin requirements are to remain the same (good selling point).

This is to protect them from clients' losses in highly volatile markets. City Index currently have a margin requirement of 5% for HBOS but this is being raised to 15%.

 

[Nut]

NOT SO. Margin requirements are to be widened next month by a few of the spreadbetting firms and they have already written to clients to inform them of the changes. One of the first to do so was City Index and CMC were quick to write to clients informing them that their margin requirements are to remain the same (good selling point).

This is to protect them from clients' losses in highly volatile markets. City Index currently have a margin requirement of 5% for HBOS but this is being raised to 15%.

So then I was right, if on something of an historical basis. Remeber past performance is no indication of future perfomance so it could be theirs more to come.

Hope not though.

Nut

 

[ns1000]

So then I was right, if on something of an historical basis. Remeber past performance is no indication of future perfomance so it could be theirs more to come.

Hope not though.

Nut

No - spreads have NOT increased. Margin requirements have