Interview with Simon Brown Managing Director of ProSpreads (formerly known as FuturesBetting) conducted by Guido, co-editor - Financial-Spread-Betting.com. E-mail us for questions or to suggest an interview at traderATfinancial-spread-betting.com.
FSB: Before we get to your service, can you give us a quick run down on how you first got involved in this industry and for how long?
Simon: I spent the first half of my career (1986-1998) trading derivatives on the London International Financial Futures Exchange, before moving into founding and managing my own broking and spread betting businesses.
FSB: What role do you play with ProSpreads? Please introduce yourself and your company to our readers and tell us a little about who owns ProSpreads.
Simon: I am the Managing Director of ProSpreads I have been Managing Director of ProSpreads (formerly FuturesBetting) since July 2007, previous to which I owned a white label spread betting company. In May 2008, ProSpreads was acquired by London Capital Group Holdings plc (LCGH), a listed financial services business, based in London. The Acquisition by London Capital Group Holdings plc in May 2008 has allowed ProSpreads to leverage from the experience that London Capital Group Holdings has in the spread betting industry and in particular its experience in growing businesses.
 |
Simon Brown Managing Director of ProSpreads
FSB: Please tell us about the platform, when was it launched? What would you say really stands out about it?
Simon: The ProSpreads spread betting platform is unique in many ways. The platform was initially launched in March 2005, and is aimed at the professional speculator. Since spread betting has become a mainstream vehicle for speculating on the financial markets, there has been an increasing demand for more sophisticated technology for executing spread bets. ProSpreads provides its customers with a spread betting platform similar to a professional futures platform which many bank and professional trading houses use to speculate and hedge in the financial markets.
ProSpreads.com is unprecedented in that it directly references its prices from the underlying futures market. In other words, our spread bet prices will always track the underlying futures price, providing its clients with true price transparency. In addition to price transparency, customers are able to benefit from the following features, most of which are particular to ProSpreads:
Most of our clients are intraday traders or scalpers - Simon
FSB: Your offering appears to be very akin to futures trading. Tell us more...
Simon: You're right, it is. We show our clients the underlying market as seen by all the other market participants. Clients can view the market depth, price and size action of the various players. Given the speed at which we automatically hedge, betting with us has the same feel and effect as if the client was trading direct market access (DMA).
FSB: How is your offering different from the traditional 'spread betting products' being offered by your counterparts in the UK?
Simon: ProSpreads has some distinct features, some of which are unavailable at other spread betting companies. ProSpreads directly references the underlying futures price and hedges every bet taken out by its clients. This means that the client will never get requoted, because if the price in the underlying futures market is available to ProSpreads for hedging, the spreadbet price is available to clients. Being re-quoted is probably the No 1 frustration we hear of other spread betting companies. Also, the betting functionality on the ProSpreads platform is advanced in that there are no restrictions on where you can place your limit and stop orders.
FSB: Why are you located offshore? Does FSC regulation apply to foreign nationals? i.e. if you are a UK citizen do you get the protection in Gibraltar?
Simon: ProSpreads is located in Gibraltar to benefit from the lower betting tax that is available compared to being based in the UK. In addition there is lower corporation tax in Gibraltar. The Financial Services Commission (FSC) in Gibraltar requires ProSpreads to classify all its customers as 'professionals'. As a result customers are not afforded the protection that is available to 'retail' customers of FSA regulated firms. However all customer money is segregated from the activities of the company.
FSB: Being based in Gibraltar, how do you get around the tax angle? Are profits still tax free as the spread betting provider is not a UK entity and thus UK law might not apply?
Simon: Qualifying UK residents are able to benefit from the zero capital gains tax available on spread bet winnings. If you are resident in another country you are bound by the tax laws of that country.
FSB: Is ProSpreads.com regulated by a Regulatory Body?
Simon: ProSpreads is authorized and regulated by The Financial Services Commission in Gibraltar (who are of comparable status to other EU regulators under European law), with a 'passport' to promote its services, via the local regulator, into certain other European countries, including the UK via the FSA.
FSB: What kind of spreads can one expect to find on ProSpreads.com? How do they compare, in your opinion to other perhaps more conventional spread betting firms?
Simon: Because ProSpreads references the underlying Futures price, its spread betting price is a widening of the underlying price. For example the FTSE 100 spread bet is a ½ point charge to enter a position and ½ point charge to exit a position. With a normal underlying spread of ½ point, this equates to a total spread of 1.5 points; however the more a customer trades the tighter the spread gets. On volume over 200 lots a month equivalent, the FTSE spread will narrow to a minimum of just 1 point. All the spreads offered by ProSpreads are competitive, which is one of the reasons ProSpreads attracts very active customers.
FSB: ProSpreads connects its clients direct to the underlying Futures market. How is this done in practice?
Simon: ProSpreads hedges every bet taken out by its customers. So what we do, is show the customer our hedging platform, which is Direct Market Access and 'pass on' the functionality that we have on that platform. So it is not our customer who enters the market, but ProSpreads who enters the market to hedge the bet taken out by its customers.
FSB: You even allow clients to join the bids and offers inside the spread. This seems revolutionary - direct market access for spread betting with the tax-free benefit?
Simon: As ProSpreads hedges every trade is is able to pass on the DMA functionality to its customers. This includes joining the bid and offers. For example if the underlying FTSE future is 3910-3911, the customer can work a limit buy bet at 3910; then if we get filled on the hedge(in other words, buying the future at 3910) then the customer will get filled also.
FSB: Is your spread always fixed on either side of the futures market or does it vary with volatility..etc?
Simon: The spread is always fixed.
FSB: Spread betting companies are sometimes criticized for playing the markets themselves against clients but it is our understanding that ProSpreads is acting as a pure intermediary and hedges all positions. Please comment.
Simon: The advanced technology utilized allows ProSpreads to hedge the spread bet in a fraction of a second, which means the client is filled on his spread bet at the same speed.
FSB: Is this the reason that your margin requirements are much higher than conventional spread betting firms? Do you hedge ALL client positions?
Simon: Yes, we currently hedge all client bets. We generally ask for 'exchange' margin; however clients who don't run overnight positions, i.e. close out before the end of the day, may receive additional gearing.
 |
>> Page 2 - ProSpreads Interview Continues Here: Questions About the Product Workings
The content of this site is copyright 2016 Financial Spread Betting Ltd. Please contact us if you wish to reproduce any of it.
