Not sure that's true, I think it depends on the company.
As an example consider trading the DOW. The real market is usually going to give you a 1 point spread, but you'll have commissions to pay. So IG can quite happily accept scalpers and hedge their risk in the real market and make money because they offer a 2 point spread. But any spreadbet offering 1 point is going to find things harder and is more likely to resort to dirty tactics (all in my opinion of course).
I thank you’re right. However, I remember reading that the overwhelming majority of SB clients are long – something in the region of 80% (don’t quote me on this!). Not sure why, guessing it’s something to do with positive bias.
Anyway, this means that the self-hedging effect can’t be relied upon because the firm would then effectively be 80% short. It would therefore need to go into the underlying market and hedge that 80% - depending of course on the risk they intend to take on their trading book.
I think you’re right about larger positions being more likely to be ‘intercepted’, but only because they couldn’t easily hedge this in the underlying market – hence the need for re-quotes etc. The trouble is, it’s hard to separate the ‘dirty tricks’ from genuine market liquidity issues.