Choosing the right Broker is a key part of being an efficient spreadbetter. It is imperative that the below are thoroughly considered before you start trading.
1. Efficient Trading Platform
The ability to trade around the clock is very much important for an efficient spread better. The resources must be in place for you to be able to trade on a wide range of markets, 24 hours a day if you may.
2. Margin Requirement
Placing a trade with a mere 5% to 10% margin would be an ideal starter. Trading with as little as that does make a difference as this gives you the opportunity to open more opportunities. However, we need to careful here, as we need to ensure that we only open positions we know we can afford!!
3. Easy Access to your Trading position
Ability to take your opportunity or cut your loss as fast as possible is another key part of trading. It is essential that you can get straight to a broker asap, when needed.
4. Price Fill and Stoppage
Do you find out that your pre-ordered trade was not executed at the price you initially placed it! You should keep a close eye on your opening and closing position of the asset you’ve ordered.
5. The Spread
If you had to choose one of the above criteria, I would insist that keeping a close eye on the spread you are offered is extremely important. Opportunity favours investors who are offered tighter spreads. The tighter the spread, the easier it becomes for you to outperform the market makers.
Every spread betting firm has its plus and minus points. Also, things change fast in this business. Key staff and dealers move from one firm to another. You can keep up to date with new developments at my site.
IG, CMC Markets, ETX Capital, Ayondo and City Index are probably the largest. All are very professional and I offer no criticism to any but they just specialise in slightly different things and operate slightly differently. All spread trading companies are regulated by the Financial Conduct Authority to provide you with protection under the Financial Services Act.
If you wish, most companies will allow you to visit their offices and trading rooms. Most spread trading companies also do Contracts For Difference (CFDs) as well if you wish to trade them. They are however, beyond the scope of this guide.
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These are my personal experiences and views of various spread betting outfits that I've used over the past 5 or 6 years;
Ayondo: I have found their spreads extremely competitive and their customer service outstanding. Unlike most other providers they pay 100% of dividends for stocks and will only charge you financing based on the amount you actually borrow and not the full position amount.
Finspreads: For non-FTSE 350 stocks these used to be my first point of call. However I have recently found my positions with them have been getting smaller and smaller. I find their spreads to be not as competitive as other companies, they have omitted dividends and, probably most importantly, I've found their customer service to be extremely poor. When I have spotted an error they have sometimes been slow to correct it. Some of the cash movements don't appear on the statements although they are actually applied to the account and are applied to the total. Hope this makes sense. If a sum is going to added or subtracted to my cash balance I like to see what it is and this opaqueness has cost me a fair amount of time in figuring out what has happened to my cash balance. Also I now watch rollover spreads like a hawk too as they have been very wide in the past. Some of these points may have something to do with my account manager who isn't always as keen to help as he should be. Sadly I wouldn't recommend Finspreads at the moment although I have to friends in the past.
CoreSpreads I also use these for FTSE250 stocks. IMO they offer the tighest spreads and cheapest funding costs on these stocks. On the very rare occasion I place an index bet these are generally the guys I use. These guys are one of the two top companies to use for the more liquid stocks. The other is Ayondo.
CMC. The biggest negatives I've found with CMC Markets is that occasionally I'll get re-quoted when I try and trade on their site. The service is also pretty impersonal and it's the only company I use where I don't have an account manager. I would have no problem in recommending them though.
ETX Capital: I've used these guys in the past but I've stopped as they've hiked the overnight financing fees. They allow positions in some non-uk stocks/indexes such as Korea, South Africa and Canada. The only reason Wish I could find a decent way of getting exposure to Brazil via a spreadbet though!
Also, I've recently opened an account with Spreadex, and so far so good - they seem a lot more prepared to support clients when things are tough, although I've not yet put this to test ! But a couple of friends have said they were very supportive.
I use spreadbets primarily to avoid CGT. If you are going to use spreadbets please, please, please watch your gearing very closely. It is very easy to have to much on the table which can wipe you out in downturns in the market. I'm sure you don't need to be told this but I feel happier saying it anyway.
The other important consideration when you are deciding who to have an account with is the minimum position size they will accept. The larger companies tend to have a higher minimum such as £2 or £3 per point whereas some companies such as Ayondo, allow as little as £1 and some smaller companies even 0.50p per point. If you are new to trading or trading with small amounts of capital, this is a big consideration. Trading small positions like £1 per point can be great fun and you can open an account with some companies with as little as £100.
But if you're dealing in any size, I would really stress the importance of spreading (haha) the business around a number of spread betting companies. This is something I've gradually learned after periodically falling out with different spread betting companies over margin calls, changing of margin percentages, credit limits, etc, all of which are annoying.
It's vital to be in a position to be able to walk away & transfer all your business to another spread betting company, without being forced out of any positions. So with my large positions I tend to hold some stock owned, and then the remainder on spread bets, but dispersed amongst 4 or 5 different companies.
It keeps them all on their toes & vying for business, and if you fall out with one, then you can just move all your positions to another. I've done that several times, and it's saved the bacon once.
Just my personal opinions, no advice intended.
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