A: No.... at LCG we have never closed/put to telephone only/deliberately delayed /changed your status or whatever. Actually, we do not do that much checking of client accounts. In the long run we know that some clients will win but more will lose. If we got any kind of name for closing down winning accounts this would be all over the Internet.
In the main the only serious checking that client accounts are subject to is money laundering / fraudulent card use etc...In fact to-date we have only ever closed an account for either reasons of fraud or being excessively rude to my staff.
We have thousands of accounts and as I have mentioned before about 21% are winners of one form or another, this is almost exactly the same as private clients on the futures (direct access) exchanges, (actually 21% is slightly better). This is probably because we force stops on all client positions and do not ring up trying to get further margin on losing bets...thus tempting them to throw good money after bad!
The fact is that if you were of a size that would become noticeable then we would be hedging you anyway as your trades would put our models over our risk parameters. Below this level all clients just form part of the whole book (winners and losers all together).
In reality the 'tricks' that spread betting companies are reputed to get up to are usually the exact opposite. It is the fact that SB companies do not let clients get up to 'tricks' that seems to grate. A client finds a little edge because of an incorrect price or a delayed feed or some such...the spread betting company cottons on to that client's activities and then 'bosh' he can no longer do it. For some reason 'ripping off' a spread betting company is considered to be fair but the SB company not letting the client do it is somehow unfair. I have worked in the industry for many years and have seen every trick in the book. 99.9% of them are attempted by clients not by the spread betting firms (who, after all, do have the FCA and the financial ombudsman looking over their shoulders).
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A: We commission Ariel Communications to develop most of our applications (as they have done for many of the spread betting companies) but we run the systems and we are responsible for all of their functionality as it impacts our clients. They are not a regulated entity but aside from being our IT supplier we have no other interests in them. (i.e. nobody at LCG owns any portion of them).
A: We are a listed company trading under the ticker LCG (London Capital Group) quoted on AIM. London Capital Group has several units including FX and derivatives broking. Clients funds are held in a segregated account (at Barclays) and we must keep funds covering all client money AND all winning bets on a daily basis. We cannot even deduct losing bets from this sum. As clients are private, unless we stipulate otherwise, they are also protected by the FCA insurance which, I think, is up to £48K per person.
As with all things, recovery of money in disaster scenarios is like asking 'how long is a piece of string'. But we are a long long way from any such problems.
cheers
Simon
A: LCG makes its money by running a risk book...we just accept nearly all trades whatever is going on. We run a risk book against client positions....but we do nothing to affect client activity...we neither recommend nor dissuade any client from any trade...nor do we EVER attempt to influence the underlying market to counteract any client position.... all we ask is that they have the required margin available to make each trade.
Oddly enough the operational P/L generally works out at around 60% of the spread on each and every trade but sometimes the clients get it right (today is a very good example) and sometimes they get it wrong (yesterday was, likewise, a good example). The lesson over the last two days is that you should always ensure that you have sufficient margin available to counteract a small adverse move. Our clients are massively short of FTSE and long of Sterling/Dollar...yesterday was quite painful but the vast majority held their positions and today they have made it all back and more. If a client had too little resourses available yesterday he would have been stopped out only to be cursing his luck today.
Most trades just go through the pricing engine with no dealer intervention but if a trade is in a size greater than a pre-determined amount (i.e 20 quid in the FTSE) or from an account assigned as dealer acknowledged (about 100 clients out of 22K) then a dealer will have to approve the trade.
Once the risk level gets above a certain level then we will start to hedge in the market. Other than that we just let clients get on with it. We get so many trades buy/sell/buy/sell etc etc that we effectively become 'the market' and we make spread all day long.
As with all bookies sometimes we lose but mainly we win... it is nothing to do with how we act towards clients or any dubious practices. It is just volume of flow. In the same way that when you see an FX platform and the liquidity is provided by the quoting banks. They just provide the ability to trade. They are not interested in the long run where the market goes they are just interested in getting the deal flow. Of course sometimes they will do well if clients are the 'wrong way round' but then occasionally they will be hurt when traders get it righ.
I am not going to say that we never increase the spreads because we did on Jan 22 (we put FTSE 100 to 2 pips from 1) but even in the most violent of markets our quote on the equities/commodities/currencies/bonds and the vast majority of indices remained the same. As have our margin requirements (3% on FTSE 100 5% on FTSE 250) even though many of our competitors increased theirs to 20/40 even 50% when the going got tough.
We do have our detractors I know but given the overall market conditions of the last year our clients have always been served exceptionally well.
We do not have software 'running' to identify winning and losing clients. At the end of each month we make an anaysis of all clients to identify the best traders and then we might term them as 'marked risk' if they are trading in serious size. we will then match them in the market... i.e. if client abc123 buys £50 oil we then go and buy the equivalent contracts in the market. We do not reject his trade and buy the contracts. We fill the client and then hedge.
We do not adjust the 'gain' on our quotes to reflect our positions. If we are unhappy with our risk simply just buy/sell the underlying instrument in the real market. No problem.
A: Short selling rules have obviously impacted spread betting firms to a certain extent but only from the reporting angle.
Only 7 per cent of our bets are in single stock equities and clients are generally 9/1 long and have been in good times and bad.
The total number of financial stocks that have been restricted on our platform is only around 100 out of over 1000 so if you do the maths you can see that the restriction made 0.07*(1/9)*(1/10) difference to our trading revenues. Or less than 0.1pc!
A: The vast majority of our clients trade in the indices, currencies and gold and oil. Hardly sophisticated instruments! They either go up or ... they go down... 50/50.
Not sure why longs are always prevalent (especially as one of the whole points of spread betting is the ease with which you can bet on the down side as easily as the up) but I believe that it is probably psychological, people feel more comfortable receiving dividend yield than paying it out and (of course) prices do usually rally more than they fall over a complete business cycle.
We do a considerable amount of client trading analysis, in fact we asked a Cambridge quant professor plus his post grad team to try to come up with a predictive 'black box' based upon the actions of our clients. The result was complete random noise with no discernable trend at all.
A: Clients funds are 'ring fenced'. With top tiered banks. Not all in one bank either. They are doubly covered in that we must place funds to cover all open winning bets as well BUT cannot take away open losing bets.
As you are aware we never give credit and all positions have stops associated with them that are non negotiable (i.e clients cannot say "i will definitely have the money with you by close of business, please hold my position open") so a 'Nick Leeson' style event is not possible with us. We do not do CFDs either which are the only real weak point in the SB companies armoury as clients make much, much, bigger punts on individual stocks (often in second line stock) in these markets. But even here many CFD companies doubled margin requirements recently (up to 20% on ftse 100 stock) so they should be well covered.
The money held with LCG is as safe as it can possibly be, as we are as anxious to maintain security as well (not least with our own funds). We monitor the situation every day and, in reality, your money is probably safer with us than with your own bank as we will be quicker to move on any disquieting news whereas private individuals may not be privy to all the events as they happen.
A: We do offer guaranteed stops but the real question is not whether the guaranteed stop is free - it is how close you can place the guaranteed stop. A couple of our competitors give 'free guaranteed stops' but you cannot place a FTSE stop loss order (for instance) closer than 50 points away!! On LCG you can place a normal stop/order just 2 points away Frankly, a guaranteed stop loss order 50 points away is worthless. LCG has never slipped a client (in six years), in some of the most volatile markets ever seen, by 48 points (50 - 2), in fact I believe the biggest slip we ever did was about 30 on a Monday morning.
The same situation is present in forex markets. Foreign exchange markets are open 24 hours a day. Minor slippage is a regular occurrence but is never as much as the minimum distance required by the guaranteed stop loss spread betting providers. I can't understand why you would you need a guaranteed stop loss order placed miles away in a 24hr market...a perfectly normal 'free' stop allowable within a reasonable distance should be more than enough 99.99% of the time... As for the other 0.01% you would have lost so much money relying on guaranteed stops set miles away from your entry point that the odds of you still having some money to worry about the 0.01% trade are minimal!
A: All I can really say is open an account and see how our platform compares. Do like for like trades at the same time and in the same amount and, at the end of say a 2 week period, see which platform performs the better. One of the major differences is the margin requirement on our platform and the ability to make trades of your required size rather than the exchange size.
We have a huge number of clients who and although (of course) some are unhappy for the vast majority the experience has been fair and above board.
A: The fact is that LCG quotes better prices (spreads), better margins, better fill levels and for longer trading sessions, overall, than for any other spread betting provider...overall we believe that the service for LCG clients is second to none.
We are better than or equal to virtually every single spread betting provider in the vast majority of markets (official spreads). Our margin requirements are far lower than our competitors. For instance to make a £1 bet on the FTSE 100 index with most of our competitors you will require upwards of 150 quid in your account. With CS you could have as little as £30 BUT you will have to have 20% more than the stop loss. Even with the 20% addition the margin required with CS is far, far lower than our competitors. Our rolling charges are lower than almost everyone (I do not have an account with all the spread betting firms so cannot check this exactly).
As opposed to most spread betting companies we did not budge our margin requirements in equities one jot over the past two years (even though we were already the lowest anyway). Except perhaps for companies like Northern Rock and Bradford and Bingley which have long gone to the wall anyway!! This when some of our competitors massively increased margin requirements on many equities (right at the worst possible time, therefore driving clients out of positions right at the bottom of the market) LCG maintained its 3% margin on FTSE 100 and 5% on FTSE 250 throughout all of the last eight months and our spreads have remained the same for all that period as well (0.1% and 0.2% respectively). On FTSE 100 stock (over 80% of all the equity trades we do) we quote 0.1% 'all in' around the market price. I believe that IG quote 0.2% 'all in' around the market quote for instance...count it 0.1 vs 0.2 is ... ta dah 'twice the spread'... In reality only 8% of all our trades are in equities...the vast majority (82% of all trades) are in just nine markets [FTSE, Dax, Dow, S&P, Gold, Oil, GBP/USD, EUR/USD, USD/YEN] all of which we either quote the same or tighter than our competitors. I believe that if you quote the most popular markets (by far) at the best prices then you can reasonably claim to be offering a good service.
Recently we increased the margin on some commodities like Gold but the price had moved from around $300 to $1000 so I do not consider that this was unreasonable. But the spread quote on Oil and Gold remains at 5 even though the price has doubled and more.
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