FSB: What markets are most popular with WorldSpreads clients?
Conor: Stock Indices and Forex compete to be the most popular depending on market conditions. 80% of our business is done in these two sectors.
FSB: What is the average holding period?
Conor: It depends on the market in question. Shares are generally held for weeks or months. FX is usually hours and sometimes only minutes. 70% of our trades are opened and closed in the one day.
FSB: What types of client do you aim to attract?
Conor: We welcome all types of client from absolute beginners through to experienced professional traders. However, WorldSpreads appeals most to clients that want to trade liquid markets at the best prices available on the internet.
FSB: Please describe your typical client. How sophisticated do you need to be to get involved?
Conor: There is no such thing as a typical client. Our clients come from all walks of life and with hugely differing levels of trading experience. Worldspreads believe we should make it as easy as possible to trade with us. Hence our platform is designed for ease of use and to be intuitive to all clients. With Worldspreads you do not need a degree in rocket science to use our system. There are certain characteristics common to many of our clients, however. They tend to be male, aged between 25 and 65, technically proficient and have an interest in financial markets.
FSB: Any idea of total volume of spread betting market / CFD trading industry? (as an industry)?
Conor: It is difficult to get an accurate estimate on volumes but some recent research suggests that between 20-30% of LSE business is based on derivatives.
FSB: What is growing faster at the retail level - Spread Betting or CFDs? And why?
Conor: In the UK it is Spread Betting due to its ease of use and the fact that any profits you make are normally free of capital gains tax. Also, over 90% of CFDs are done on single shares, as opposed to Indices or FX, and many clients were wiped out on individual shares, notably the banks, in 2008 and early 2009. As a result, a lot of CFD clients have left the market and may not return for some time.
FSB: Which typically is your busiest month of the year? Tell us of some of the busiest periods you have experienced over the years (could be elections…etc) you have been in business.
Conor: February to June and September to November have been typically busy periods over the past few years but the markets have some input here as major moves and volatility often increase levels of business we see. One recent incredibly busy period was September 2008 when the banks collapsed. We are expecting a relatively quiet Summer this year with the World Cup but would expect a return to higher levels of volatility when many of the southern Europeans return to work in September and realize their banks are in perilous situations. Another sovereign debt crisis is on the cards in the coming year and that has potential to put unbearable pressure on the Euro.
FSB: What's your view on the future of spread betting in general?
Conor: The spread betting industry will continue to grow in the years ahead and will outstrip all of the other 'commission-based' ways to trade the market. More and more investors are realizing how little value is being added by advisory brokers and prefer to trade based on decisions they formulate themselves. Improvements in mobile technology, both speed and quality, will also result in an increase in the demand for financial spread betting.
FSB: Do you envisage that there will be major regulatory changes with regards to spread betting in the future?
Conor: The spread betting industry is very well regulated and enjoys a good relationship with the Regulator. Client funds are segregated and there are strict rules on advertising content. The Inland Revenue generates a good return every year from the participants in the industry, so there is no need for major regulatory changes.
FSB: What sort of stakes are your clients trading for? Where is the bulk of the action?
Conor: Stakes can vary wildly and we accept trades from as little as £1 per point. We also have clients who trade as much as £1,000 per point in the Dow Jones. Amongst our most popular markets are the UK 100 index, the Dax and major equities such as the banks (unsurprisingly given their recent history).
FSB: Do you see any differences in trading when the stakes are raised? How do experienced traders behave in such situations vis-a-vis speculative traders?
Conor: There are many different styles of trading - and they are not really dependent on size of stake. The stand out feature of experienced trades is their discipline to close out trades when things go wrong for them. We see far too many novice traders taking their profits early and running with their losses.
FSB: What instruments might be better suited for beginners? Indices, equities, shares, FX?
Conor: When starting out, beginners should concentrate on one or two markets that they have a keen interest in and they can research easily. This is often their home index (UK 100 here) and some stocks they are interested in. Other favourites include oil and gold as they are often in the news. It is important to do research into whatever market you decide to trade. It is also important to start small. There is a well-known quote that “The market can remain irrational longer than you can remain solvent”, so, even if you are adamant that your view is correct, you may have to exit too soon.
FSB: What differentiates you from other competitors?
Conor: Our commitment to squeeze down the cost of trading whilst not compromising on client service is the main driver of WorldSpreads. Clients come for the prices and stay for the service.
FSB: Can you give us an idea of how many customers you have what's your annual turnover and profit?
Conor: We have about 12,000 clients. To the end of March, 2010 WorldSpreads had a Turnover of €11m and a Profit Before Tax of £2.5m.
FSB: We've seen more companies move into this market and the structure of products change. What changes do you think there are going to be over the next few years? What challenges do you see ahead?
Conor: At the end of the day, there are only so many ways to present a “Buy or Sell” proposition. Certain firms have fancy ways of presenting this and add all types of slick features to compliment this. Our view is that 'price and service' are the two most important things and that is where our emphasis lies. There will definitely be enhancements in technology in the years ahead. We are working on a set of goggles that would revolutionize the way investors trade, but it is still in the very early stages of development yet and we are not certain we will be able to get it operational. The big challenge or 'risk' ahead is a collapse in world markets and the associated 'wealth effect'.
FSB: We know that most if not all spread betting providers provide a market maker platform (i.e. quote driven platform). What are the advantages of this platform as opposed to dealing directly on the market (i.e. direct market access)?
Conor: The main difference is you get the price you trade at without any fees. Your orders and trades do not get mixed up with a host of others from other individuals and large institutional business. If you wanted to trade €/$ we offer a fixed 1 point spread between 8am and 4pm where as this spread varies in the actual market and is generally at least 2 points wide and often more (as we speak the market is currently 5 points wide thus increasing the clients cost of dealing dramatically).
FSB: The growth of the spread betting and CFD markets are sometimes blamed for making traditional stock markets increasingly volatile. Do derivatives really amplify the share moves?
Conor: Some people are always looking for a bogey man to blame. The greater the liquidity in a market the more stable a market generally becomes. In so far as derivatives add to liquidity it can be argued that they actually add to stability…
FSB: How safe are client funds? What is the situation regarding our funds deposited at WorldSpreads? In particular are funds segregated from the company's own funds and where are client funds held?
Conor: Client funds are 100% safe at WorldSpreads. Every penny of Client Funds at WorldSpreads is segregated from the company's own funds. Cleint Funds are held in an account with RBS, which is basically a state guarantee.
FSB: Do you organize any training seminars or meetings which our readers could attend? Do you have any special sign-up trade offers for our readers who decide to go ahead and open an account at WorldSpreads?
Conor: We do offer seminars and meetings but we also offer free 1-2-1 sessions for both new and existing clients. We find this dedicated time (1hr) on a 1-2-1 basis means we can provide more tailored and bespoke information to clients. It also allows clients to ask any questions they want rather than following a fixed agenda and competing with others to ensure you can ask the questions you want to.
Conor: New clients who deposit £500 into their account will be entitled to up to £300 cash back to cover their net losses during the first 8 weeks of trading. All you have to do is place 10 closing trades during this period and we will refund up to £300 against any net losses you make. This allows new clients to try spread betting and our service with the safety net of knowing should they make a net loss we will happily refund them up to £300.
FSB: Have you any parting words for our readers?
Conor: If you are serious about making money in the financial markets, not because we are the best firm in the industry (that is subjective!), but because we offer the best prices in the industry, which can be plainly proved by doing a like-for-like comparison between WorldSpreads and other companies. It takes 3 minutes to open an account and we offer credit to qualifying clients.
FSB: Thank you for your insight and time, Mr Conor Foley
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