Capital Spreads was set up in October 2003 as a small spread betting provider in competition with IG Index, City Index, Cantor Index...et all... In fact it is said that some of the co-founders were former members of the Cantor Index team. The company has experienced rapid growth over the last few years and today has a place amongst the big 'four'.
On opening an account, CapitalSpreads will ask you about your salary to determine your suitability although they do not make actual credit checks on clients as they work purely on a cash basis, by placing an automatic adjustable stop loss order on every trade according to the amount of money the client has in their account. The trading interface does not require any software download. Don't miss out trying their simulator trading platform which mimics their real one (but ignore the charts in the demo version as they can be delayed, if you want exact quotes go for a live account). Their major selling points are security (no credit and stops against all open positions), gearing (very competitive margin requirements: for instance FTSE just £30 per £1 trade, Dow £30 per £1 trade), simplicity and tighter spreads - after all, that's the thing that spread betters most want. It's a small lean organisation, but is growing rapidly and has now even partnered with some renowned names like PartyGaming and Betfair.
'Quite a few of our competitors have increased their margins across a lot of their products but we've only increased margin on the financial stocks. For the remainder of our markets, we've maintained very low margins.'
CapitalSpreads convinced me to use them a couple of years back and a virtual and real account were set up in minutes. They do not require a minimum deposit and the minimum stake is either £1, $1 or €1 per point/tick. The platform is very fast/simple to use and I have not seen the slightest sign of tampering with it.
After using their simulated account for sometime I have now done countless trades for real. I am happy to say that most of the trades are filled at the screen price, and the stops are activated correctly. The site is relatively easy to use. Inputting orders to your portfolio is hassle free as is removing. For closing trades you simply press 'close' and a screen comes up with the 'opposite' trade button - no chance of mistakenly doing another trade.
Their spreads also compare quite favourably to industry peers...the Dec Wall Street is quoted 5 wide, daily is quoted 1 point (2 points out-of-hours) wide...this compares well with most other spreadbetting companies. The FX...the forward FX i.e the quarterly prices are 10 wide (some of the other spread betting companies quote anywhere from 14 to 40!!) and their daily FX prices are 1 to 2 points wide.
What is particularly interesting is that they have repeatedly said that as a provider they aim to keep their spreads as tight as possible, and they try to do this for as long as possible too, so for the most part you won't see their dealing spreads suddenly widening as can be the case with other providers. They also claim no re-quotes, a deal is either done or not and they don't seem to be looking for the really big punters so their maximum size in the various markets should be sufficient to allow nearly all trades to just go straight through. Of course they may reject a trade if the price is no longer valid but the rejection is usually in seconds.
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Moreover, CapitalSpreads do not activate stop losses when they are closed. If the market goes through your stop loss level and then back up again in out of hours trading CapitalSpreads ignores the stop and lets your position running. Also, I honestly must say that during the years I have traded with Capital Spreads, they cannot be accused of spiking to set off a lot of stops.
BUT (warning) they do apply slippage...as per their terms and conditions...so if the market closes just short of your stop level and then opens up the next day a long way through you will be stopped out at the level that the market opens up at the next day and not at your stop level. You can use automated orders to get filled and most of the times you will be filled although sometimes you will get a bit of slippage.
With CMC Markets to exit a bet you must trade out on their spread no matter how long you hold the position. If you have a daily bet with CapitalSpreads in the FTSE it expires at the closing level of the FTSE that day with no additional spread added. I also like the way Capital Spreads keep positions open and charge financing every time a bet rolls over so I can see the daily costs as a single line in the trading logs. This works straightforwardly in Excel, where I have a lookup function allowing me to filter by instrument. Simple. Not so with IG.
On the downside trading with CapitalSpreads during an extremely volatile market is at times hard although they have improved over the last few months. Sometimes markets do go to telephone trading only but this is very infrequent and generally not to do with fast markets and more to do with a problem. My choice is to trade with them during market conditions when they perform well. Honestly, many spread betting companies have problems executing flawlessly during extreme market conditions. When volatility is going through the roof it might be a better choice to be restrictive in one's trading with spread betting or go DMA.
And yes the automatic stop loss is a bit off-putting but this comes with the good and the bad. In practice, I do like the LCG/CS approach to margins, where you essentially pay up-front for the margin which is good for that position whatever happens to price. The way it works is that every new spread bet is automatically allocated a stop loss based on 80% of the funds available in the client's account, or set at a 'maximum computer-generated stop loss' but you can move the stop to wherever you like (as long as you have the margin on the account) so I suppose that they would claim they are protecting you from catastophic events. Mind you they are also protecting themselves from having to call customers up for money!! Which probably makes them happier. The further away the stop is placed the more margin is used. The computer applies 20% extra margin to the stop level (this is the protection against gapping in the market) so that if you had a stop of 100 points on a £10 bet this would use £1200 of margin. So long as you do not move your stop, your margin should stay the same, unless the firm decides to change margin requirements in the middle of your position, which theoretically can happen, but isn't that common. With this system, your stop will be hit before you get a margin call, which to me is a much more transparent thing ... you have direct and transparent control over your stop. It is much less transparent when it comes to margin, in my experience. I don't mind being stopped out. I don't like being margin called when my stop is nowhere near being hit, as has happened on occasions with firms that do not work like LCG/CS...etc
Capital Spreads also offer trailing stops on all their markets although these are not guaranteed. Guaranteed Stops are available for an extra charge. Various useful and educational tools are provided such as Live Squawk feed to assist spread traders keep in the loop with market news headlines throughout the trading day, technical analysis tools as well as Heatmaps that provide at-a-glance guides to the market hotspots.
A point worth noting is that Capital Spreads also run regular 'Learn to Bet', 'Advanced' and 'Trading Strategies' seminars (the last two of which are hosted by experienced experts who are independent of Capital Spreads) on investing and trading to enhance members' technical knowledge of spreadbetting and address issues of current topical interest. In 2011 they've also launched new charts allowing traders the opportunity to apply indicators, set trading alerts and backtest their trading systems. Additionally, the platform seems to have improved a lot with a new recent release which includes some useful functionality such as stop and limit orders appearing on the trade tickets, a split screen facility allowing multiple screen options, as well as the option to have multiple trade tickets on screen all with a 'tear off' facility.
Capital Spreads was established in October 2003 and apparently some of the co-founders were former members of the Cantor Index team. CapitalSpreads also provides a handy simulator account where new traders can trade with £10,000 ($16,000) using the same functionality available to 'real money' clients. According to Simon Denham, director of Capital Spreads, more than 250,000 people have opened a demo account [October 2010]. Of these, 12 per cent have moved on to open a 'real money' account which is about half of all the clients they have acquired,.
A company listed on the London Stock Exchange (ticker LCG), which has been around for quite a few years now, with competitive spreads and fast execution of orders and with an active interest in ongoing feedback from its clients - all very good points in my book and I can fully recommend them.
Want more? Our interview the Managing Director at Capital Spreads is available here.
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