Financial Spread Betting News

14/02/2009,

Ireland-based online trading company Delta Index is expanding into Germany with the launch of a new Contracts for Difference product targeted to the German retail market.

The penetration into Germany is set to be Delta's first step into the European market. If all goes to plans the company is aiming to create 100 new jobs at its Dublin base over the next three years.

CFDs are widely accepted as legitimate financial products in Germany, and the country now boasts an estimated 40,000 active CFD traders compared (with the number growing at a rate of 6% per month) to fewer than 4,000 in Ireland. This figure is projected to reach 250,000 over the next three to five years as the market matures.

The company said it also plans to expand into Spain and Italy later this year.

Thoughts: With the passing of MiFId (EU's Markets in Financial Instruments Directive) in 2007 financial betting companies like Delta Index are regulated by the financial regulator and this gives them a passport to operate in any EU member country. Both CFDs and spread betting profits are taxable in Germany so Delta is naturally concentrating exclusively on CFDs in that market.

11/02/2009,

ShortsandLongs - the only spread betting company to offer free guaranteed stops to all of its clients - has had a print advertisement banned by the Advertising Standards Authority after they received one complaint which said it was glamorising spread betting. The advert, which featured in a number of publications, shows a man in a car with two attractive women and the ASA judged that it irresponsibly linked gambling with sexual success and enhanced attractiveness.

The site was launched in September 2008 as a revolutionary way to trade financial markets through spread betting. It allows all clients to place trades knowing exactly what their maximum exposure will be, whilst still giving customers the chance to enjoy open-ended winning trades. Traditionally, the volatile nature of spread betting has left traders facing the risk of open-ended losses as well as wins.

ShortsandLongs spokesman Andy MacKenzie said:

'We are disappointed that the ASA has made the decision to ban the advert after receiving just one complaint. The simple fact of the matter is that ShortsandLongs actually reduces the risks of spread betting. All of our clients have free guaranteed stops so they know exactly what they are risking with each trade. In these difficult times, we feel that we are leading the way in responsible gambling rather than glamorising betting. In no way do we mean to suggest that opening an account with us is going to make you any better looking!'

About ShortsandLongs

ShortsandLongs is a trading name of Spreadex Ltd, a financial and sports spread betting firm founded in 1999, which specialises in the personal service and credit area. Having been very successful, Spreadex decided to create ShortsandLongs.com in order to bring the benefits of its expertise to a wider market. Spreadex clients trade in both financial and sports markets and it is authorised and regulated by the Financial Services Authority. As part of Spreadex, ShortsandLongs.com members can be reassured that they will benefit from the same exacting standards, whilst having access to a unique and exclusive trading environment.

To enable you to set your risk levels with confidence, ShortsandLongs offers totally FREE guaranteed stop orders (other providers may charge a premium). This protects you against 'gapping through' both overnight and in times of volatile market movements. ShortsandLongs Elite traders can benefit from fluctuations in some of the most exciting, dynamic and volatile world markets like oil and foreign exchange, alongside the more easily obtainable markets of shares, indices and bonds.

Want to see it? -> Banned ShortsandLongs Advert (1930 Kb)

Thoughts: An advert gone bad or has it not... The ASA keeps getting tougher on daring marketers and ShortsandLongs joins the ranks of Paddy which also had a spread betting advert banned...

03/02/2009,

London Capital Group, the online spreadbetting, forex and derivatives broking company which operates flagship site Capital Spreads, has signed contracts with Saxo Bank to provide the bank with a white label spread trading product. The trading platform, which will operate as saxospreads.com, is now live.

The deal is the latest in a string of white label contracts signed between London Capital and financial businesses. Last autumn it agreed two separate deals with betting groups Betfair and Paddy Power (through Paddy Power Trader).

Last month London Capital reported that trading for the year to December 31, 2008, was ahead of management expectations.

Thoughts: Another coup for London Capital Group this time it is Danish trading giant Saxo Bank which will operate on a white label arrangement. Naturally, Saxo Bank hopes that clients will be attracted to doing business with an international trading outfit that offers a one-stop shop...

31/01/2009,

Shorting was banned by the Financial Services Authority last September on 34 UK financial stocks after short selling was blamed for wiping millions off the value of bank shares, betting as it did that prices would fall as the recession deepened.

Perhaps unsurprisingly on January 16th, the following day after the lifting of the ban, the number of new trading ideas submitted by institutional brokers to traders and portfolio managers for the 34 financial companies which had been covered by the ban grew some 1200% percent over January 9th.

At the end of the trading session on January 16th, on the day that short selling was again allowed, a familiar pattern had re-emerged. Barclays closed sharply lower down at 25% (although the bank reported that its profits would be 'well ahead' of the pounds 5.3bn predicted by some forecasts), while Royal Bank of Scotland fell by 13%. Barclays kept falling until January 23rd when the share price finally reversed direction.

'The shorting ban has been lifted and I guess the short guys have been sharpening up their tools and looking to see who they'll have a pop at next,' said James Hamilton, a Numis Securities analyst.

Excerpt from Risk News -:

'Figures from London-based Dataexplorers.com, a provider of information on the securities financing industry, show that the percentage of shares outstanding on loan for three major UK banks Royal Bank of Scotland, Lloyds Banking Group and HSBC rose only slightly between January 15 and January 28. Royal Bank of Scotland shares on loan went from 0.22% to 0.62% of total shares outstanding, Lloyds shares from 1.19% to 1.3% and HSBC from 1.53% to 2.47%.

Barclays proved a slight exception. Its shares outstanding on loan rose more sharply after the ban was lifted, from 3.14% on January 15 to 5.81% on January 23. Over this same period, its share price dropped 61% from 130.4p to 51.2p.

However, with Barclays' share price recovering dramatically on January 26 to 88.7p, traders who had sold the stock short could have got badly burnt. The turnaround came after an open letter from the bank's chairman, Marcus Agius, and chief executive, John Varley, reassured investors that the bank was adequately capitalised and would not require an injection of government money.

There was minimal evidence of short positions being closed the next day, however, with Barclays shares outstanding on loan only dropping 0.02 percentage points to 5.79%. As of January 28, this level had risen again to 6.19%, while the share price stood at 107p.'

The FSA will continue to require disclosure of net short positions in UK financials until June 30 if the position reaches 0.25% of the institution's issued share capital.

Thoughts: I've always held the opinion that short selling adds liquidity to the markets and removes pricing inaccuracies. According to research from the LSE, spreads in those shares covered by the ban had widened by 150 per cent more than spreads in a control sample of other shares. Not only that but turnover in those shares included in the ban had fallen by 21 per cent when the ban was in effect, against a 42 per cent increase in turnover in the control sample. The ban failed to protect share prices when it was in force. In fact the banking sector had still fallen by 32 per cent since last September even when the ban was still in place. And it is a fact that that we have no evidence at the moment on that the removal of the ban on short selling had a significant effect on the price weakness of the share prices of UK banks. I'm only appalled and angry at the way greedy bankers and inadequate regulators have brought about the current colossal international financial meltdown.

31/01/2009, Excerpt from the Independent

Short selling positions on retail shares have almost doubled between November and January, as investors bet on further gloom for the sector, Capital Spreads has revealed. The spread betting firm said that almost a quarter of all short positions are now allocated to retail shares. The firm's client base shows that clothing shares are much more out of favour than the food retailers, citing Next, Marks & Spencer and Debenhams as being among the most heavily shorted retail stocks.

Thoughts: Not surprising really although much bad news is already factored in the retail stock prices. Undoubtedly there is more pain to come over the winter months - the Christmas holiday period is now over and with it the famous boom in business.

31/01/2009, Rosemary Gallagher, Scotland on Sunday

Spread betting firms have attracted new clients wanting to bet on the market rather than see it as a longer term investment. CMC Markets has signed up 1,000 clients in Scotland since opening its Edinburgh office 12 months ago.

The company, which is 10 per cent owned by investment bank Goldman Sachs, has a worldwide network of offices. In the UK, Edinburgh is its only branch outside London. Over the next 12 months Mike McCudden, CMC Scotland branch manager, said it aims to increase its number of spread betters north of the border by 100 per cent

In December alone Scottish clients performed around 22,000 trades with CMC, with many 'going short' by first selling a share or commodity they think will fall in value and buying it back at a cheaper price

He said the firm had not seen any downturn in trading during the recent Financial Services Authority's ban on short selling

McCudden said: 'With the likes of Royal Bank of Scotland and HBOS having been in the news, we've seen more interest from investors.'

He added that 25 per cent of new business had come through referrals from existing clients.

CMC does not plan to open any more UK offices and will instead concentrate on growing its business in Scotland from its Edinburgh base, where it now has six employees.

A major target will be the north-east of the country which the firm considers a lucrative area because of the wealth that has been generated from oil. Investors can sign up to online training seminars rather than attend face-to-face sessions in the Edinburgh office. All new clients are offered a "risk free" day of trading on the FTSE 100 Index where any profits are kept by the clients and losses assumed by CMC.

All clients receive an education pack, including a DVD presented actor by James Nesbitt to explain the basics of spread betting to investors.

IG Index don't seem to have lost much time reviewing their risk exposure and are changing the deposit rates on a large number of shares, from Monday 9 February. Some rates have actually gone down, but for many the rate has gone up. For example, I have spread bets in Vane Minerals (VML). Their margin requirement has increased from 25% TO 75% [75% margin - may as well make it 100? ]. Again I have no problem with them doing this for new positions, but for existing positions that is moving the goal posts and the same as a bookie changing the odds of your bet after the race has started.

An IG spokesman stated 'Having recently undertaken a wide-ranging review of our deposit rates for individual shares, these changes will ensure that our margining policy is appropriate to the persistent and unprecedented volatility we have seen in underlying markets.'

On a separate basis it appears that IG markets are also withdrawing from the SIPP CFD market. Very strange as I would have thought it would is mega profitable for them. Who has experience with other providers? I see City Index charges .2%, min £15 commission.

Updated deposit rate margins (1.40MB).

Thoughts: Most deposit margins going up, a few down, the update in deposit margins was a necessary evil for IG to reduce the number of chancers who trade with too little margin in volatile times.

20/01/2009, Steve McGrath, Dow Jones Newswires

LONDON (Dow Jones)--U.K.-based financial derivatives and sports betting company IG Group Holdings PLC (IGG.LN) Tuesday revealed a jump in first-half revenue and profit as the market collapse prompted customers to switch to short-term trading of indices and currencies from trading in individual shares.

"Revenue from both these areas has grown very strongly, more than making up for the weakness in sares and, together with the impressive performance of our newer international operations, has enabled us to achieve continued strong organic growth," the company said.

Chief Executive Tim Howkins said he is confident in the company's outlook despite uncertain market conditions. He said lower interest rates will hit the return on its cash balances in the second half of the fiscal year, but the pound's recent fall will boost income from its growing overseas operations.

During the first six months of the fiscal year, the company reported net profit of £37.7 million, up 14% from £33.1 million a year earlier. Pretax profit was up 13% to £54.6 million from £48.2 million, underperforming a 47% rise in revenue to £126.5 million, mainly due to higher administration costs and a charge of £14.7 million for bad customer debts. The half ended Nov. 30.

IG Group said most of the bad debts arose in October as markets swung wildly and hit customers. However, it said it is still at an early stage of chasing the debt and it expects to achieve a good level of recovery. It has also become more risk adverse, and clients on margin call are now closed out before they get into deficit.

Showing its confidence, the company raised its interim dividend to 4 pence from 3 pence a year earlier.

Most of the revenue growth was organic, though the company was also boosted by the acquisition in October of FXOnline Japan KK, which increased its presence in Asia-Pacific.

"Our main focus in the second half will be on continuing to grow our existing businesses worldwide. However, we continue to evaluate a number of new markets," the company said.

It will also re-launch its sports betting business in the second half of the year. The unit accounted for only 3% of revenue in the first half.

Thoughts: A relatively positive update in a sea of red - will this be sufficient to shore a declining share price? The UK business has continued to grow reflecting IG's dominant position in the market. Quoting a broker's statement 'The brand, technology and strong management team places IG well to take advantage of continued volatility in the UK markets and expansion opportunities abroad'

17/01/2009,

It has been reported on the Financial Times that Monday will see the launch of Victor Chandler Financials, a joint venture with Worldspreads, the Dublin-based spread betting company, and he plans to initially start offering the service to the UK portion of Victor Chandler's 1.7m global clients. Victor Chandler as a bookie mainly targets the Asian market and plans to make the spread betting offering available to his Asian patrons later this year.

'I would have been more worried if we had launched in the latter quarter of last year when most of us who play the market had burned our fingers,' says the 57-year-old chairman.

Mr Chandler is often seen as the last of the nicknamed so called 'gentlemen bookmakers'. The Victor Chandler business was set up by his grandfather in 1946 and when his father, Victor Senior, died in 1974, Victor Chandler took over the business which he initially tried to sell but after some time decided to keep running it himself.

Victor Chandler led the bookmaking industry offshore to Gibraltar in 1998 to be able to offer tax free betting to his punters which was duly followed by Ladbrokes and other rivals and eventually this pushed the chancellor of England to abolish betting tax in 2001.

It is only a matter of time before other bookies join him and start offering financial spread betting, he believes, although Paddy Power beat him to it by 15 months in a joint venture with London Capital, and both Ladbrokes and W have tried it out without much success.

09/01/2009,

Knowledge and education are two of the most crucial parts to being a successful spread bettor. Paddy has today launched a learning tool called a trader report (see PDF) in order to help traders be more informed on market movements. This, claim the PR people at Paddy is a revolutionary measure to help traders develop more skills and familiarise with the market.

The daily trader report will be a daily insight into movers and shakers in the main Irish and world markets. Compiled by analysts at Paddy Power team each morning, the reports are aimed at aiding traders and media on the markets. The trader reports will be available daily to visitors to the Paddy Power website. Just click on the link Trader Report.

'Enhancing the usability of our website, platform and enhancing the educational tools available to traders and spread bettors is a key priority for paddypowertrader.com,' Davin McAnaney, Commercial Manager of paddypowertrader.com.

'We have been enabling retail investors and novice spread bettors to enter into the spread betting arena for the past 18 months. This is just another example of bringing creative and innovative products to users of our services,' McAnaney continued.

'The trader reports will help to inform clients and look likely to be a popular tool for both advanced and novice spread bettors everywhere,' he concluded.

Paddy Power Trader launched in the summer of 2007 enabling clients to take advantage of the many benefits of financial spread betting, including being a tax-free alternative to trading shares and financial markets. The product continues to grow in popularity in the UK and Ireland, amongst not only financial industry professionals, but also amongst those with an interest in the stock market.

Thoughts: No doubt another marketing exercise by the team at Paddy Power but the report reveals some interesting data on how poorly the markets have performed over last year - the FTSE 100 having gone down 25.52%, the Dow 32.21%, NASDAQ even worse with a 36.35% decline and how the Pound has seriously weakened when compared to its old counterparts, the Dollar and Euro; £/USD experiencing a massive 25.30% shortfall over the year and a corresponding strenghtening of the EUR against the Pound (EUR/£ 21.06%).

09/01/2009,

Britain's Financial Services Authority said on Monday that its ban on short-selling financial stocks would expire on Jan. 16, but that it would reintroduce the ban without consultation if needed.

The FSA also said it would extend rules requiring net short positions in financial stocks to be disclosed until June 30, although disclosure will only be required at 0.1 percent bands.

Thoughts: It is good to see the Financial Services Authority (FSA) has finally come to its senses and decided not to extend the shorting ban on financial stocks. The US regulator has also admitted that a similar ban it implemented in the United States was a failure but I don't suppose the FSA will ever admit it made a mistake.

07/01/2009,

Unlike the wider financial sector, London Capital Group (LCG), the owner of Capital Spreads, continues to grow. The company said on Tuesday it would propose an increased 2008 dividend after trading exceeded management expectations, helping lift shares in the company over 7 percent.

'The group continues to remain debt free, and the proposed dividend will be paid out of net cash held,' the company said in a trading update.

The online broker described bad debts of less than 100,000 pounds ($145,400) in 2008 as "minimal". That contrasts with the fortunes of IG Group, which, while still pulling in clients, disclosed in November that its provision for doubtful and bad debts had jumped to £15m after some customers' bets went wrong during extremely volatile financial market conditions in October.

Shares in the company, which fell 40 percent last year and performed broadly in line with the overall market, were up 7.4 percent at 277 pence by 0856 GMT.

07/01/2009,

I just read a message from IG Index warning that, from the quarterly rollovers on 16 December, it will alter margin requirements. Instead of margin being calculated on the opening price for a bet, it will alter based on the midprice in the market. Hence, margin on open bets will increase as share prices increase.

This is a MUCH more rational approach than their previous policy, and I wouldn't be at all surprised if they haven't done it as a result of user feedback.

I found myself irritated by the existing policy earlier in the year:

If you buy a share a 100p with a 25% margin and it subsequently falls to 40p - the fact that you were still required to put up 25p margin as well as fund the 60p loses can be more than a little annoying.

On one occasion I did actually revert to selling and re-opening to get a proper margin (eg 40p * 0.25 = 10p rather than 25p).

Maybe the fact that they have finally made this change at or near (maybe - lets not have that discussion again, for now!) the bottom may indicate that they are looking after themselves rather than their clients.

Of course this also means that this is less beneficial for clients in a rising market. It's hardly unreasonable though and indeed it 'enforces' a (limited) degree of prudence in investors.

If you buy a share at 40p lets say at 10% margin (4p) is it really reasonable to expect if the price rises to 100p that one should still only have a margin requirement of 4p (effectively 4%)? I don't think so, and it strikes me as a welcome (if overdue) change.

05/01/2009,

Spread bettors have been diving into Irish shares since the beginning of 2008. Unfortunately the ISEQ Index has lost 66.31% of its value year to date. According to Paddy Power 2008's worst performing shares, sneak preview released today (pdf), paddypowertrader's spread bettors, trading on Irish shares like Ryanair, CRH, Elan, and the four major Irish banks have been briskly trading throughout 2008 despite the unstable conditions.

Analysts have attributed the huge losses on the ISEQ and the ongoing uncertainty to the banking sector, commodities markets and generally bearish market sentiment.

'We have compiled a list of the worst performing shares in the top 25 Irish public companies over 2008. Topping the list, having lost 98.4% of its value year to date, is Anglo Irish Bank. Irish Continenta, at the bottom of the list, is the best performer of the year having only lost 14.92% of its value. It's pretty depressing reading, with stalwarts like Ryanair down 34.56%, Kerry Group down 38.48% and Dragon Oil having lost 65.62%.

We wanted to compile a comprehensive list of performances of Irish Shares in 2008. The fact that almost all notable companies lost share value over the year was quite interesting but not unsurprising, considering the market meltdown this year.' said Davin McAnaney, Commercial Manager of Paddy Power Trader.

Other Irish movers attracting attention on the paddypowertrader.com sneak preview of 2008 are Allied Irish Banks and Elan Corporation. Elan, have dropped 70.73% while AIB Bank is currently trading at 88.51% down year to date.

'This is a developing market for paddypowertrader.com. We can see that trading on Irish equities is dominating our trading balance. However it is interesting to note that the top falling share prices are the four banks despite the ban on short selling financial shares still in place in Ireland,' concluded McAnaney.

Paddy Power Trader launched in the summer of 2007 enabling clients to take advantage of the many benefits of financial spread betting, including being a tax-free alternative to trading shares and financial markets. The product continues to grow in popularity in the UK and Ireland, amongst not only financial industry professionals, but also amongst those with an interest in the stock market.

20/12/2008,

Dublin-listed financial spread betting firm WorldSpreads has signed a deal with Gibraltar-based betting company Victor Chandler International (VCI).

Under the deal, WorldSpreads will provide its financial spread betting services to VCI's customers at a new Victor Chandler website under the brand www.victorchandlerfinancials.com for VCI, using Worldspreads' price and operational system, with profits shared between the two companies in an agreed percentage ratio.

VCI, a family-owned company, led the exodus of British bookmakers to Gibraltar in the mid-1990s.

Thoughts: A nice deal for WorlsSpreads. This is the second white label partnership between a sports betting site and a spread betting provider, PartyGaming having entered into a partnership with City Index earlier this year.

17/12/2008,

Banking stocks are set to rally in 2009 - that's the view of clients at established spread betting firm Spreadex.

With a number of sectors suffering record falls during a turbulent year of trading, investors have been keen to identify firms who may buck the trend in the New Year. And a list of the top 10 most positively traded equities among the company's customer base shows RBS, Barclays, Lloyds and HBOS in the top four and HSBC in tenth place.

Spreadex spokesman Andy MacKenzie said: 'The results suggest some much-needed confidence is finally returning to the banking sector.

'The view of our customers appears to be that the big institutions have weathered the worst of the storm - an opinion backed up by the markets themselves after the positive reaction this week to the Bernard Madoff Wall Street fraud.'

MacKenzie added: 'Mining stocks and gas and oil companies have also traditionally been favourites among our clients and Rio Tinto appears to be back in favour after the cost-cutting measures announced this month while Soco International is another firm attracting attention from our customers.'

Editor's note: Spreadex Ltd is authorised and regulated by the Financial Services Authority. Spread betting carries a high level of risk to your capital and can result in losses larger than your initial stake/deposit. It may not be suitable for everyone, so please ensure you fully understand the risks involved.

Thoughts: A bit of public relations but interesting that Spreadex clients are backing the banks for recovery in 2009

04/12/2008,

Capital Spreads has announced that it will start offering the markets below for 24-hour trading -: