Financial-Spread-Betting: Today, we are pleased to interview Andy Mackenzie of Spreadex.com.
Financial-Spread-Betting: Tell us a little about Spreadex. Who owns you and how big is Spreadex? What makes the bulk of your activity - sports spread betting or financial spread betting?
Andy: Spreadex is a sports and financial spread betting company authorised and regulated by the Financial Services Authority. It was established just over 8 years ago (in February 2000) and covers both sports spread betting (on all domestic/global sporting events) and financial spread trading in shares, world indices interest rate, and commodity markets.
Spreadex is privately owned by a consortium of successful businessmen. Spreadex has grown from around 20 staff to now employing circa 70 people. The sports department in personnel terms has more than double the numbers and on a monthly basis the number of bets taken on sports are roughly 1 ½ times the number of trades on financials. Margins, however, are larger in the financial markets.
Spreadex Offices - Video footage scenes of their trading floors and interviews with key personnel
Financial-Spread-Betting: What dealing platform do you use? Is it proprietary?
Andy: We use an in-house developed platform.
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Financial-Spread-Betting: Are clients welcome to visit your offices? We have heard that you have a shop in the city if someone would like to bet person to person so as to say. Tell us about it.
Andy: Clients are welcome to visit our offices though we are in the process of moving our base from Dunstable to St Albans. The new premises will be larger and in a much more attractive environment with improved communication links to London. The city shop was purely a marketing outlet that ceased to function as such about two years ago.
Financial-Spread-Betting: What markets do you deal in? Do you offer trading on UK sectors (food & drug, construction...etc)?
Andy: We don't offer markets on sectors. We do offer UK stocks with a market capitalization greater than £7mil as a rule as well as US and European stocks. Most major indices traded in the US and European time zones, currency futures and spot rates, interest rate futures and an increasing array of commodities are also offered.
Financial-Spread-Betting: What kind of stops are available?
Andy: Opening orders, closing orders, stops, and guaranteed stops orders are offered. Guaranteed orders are offered on limited markets such as indices and FTSE 350 companies and attract a small charge to cover the insurance risk.
Financial-Spread-Betting: Tell us more about your guaranteed stop losses... Can I place a guaranteed stop loss on a FTSE 250 stock at Spreadex? Also, what is the minimum and maximum level I can place a GSLO at (from current price)? Lastly, is it possible to move a guaranteed stop loss once placed? [or does this incur extra fees]
Andy: Yes, we do offer guaranteed stop loss orders on the FTSE 350 (so al FTSE 250 companies are included) companies. The minimum distance away from initial entry is %10 and yes you can move the guaranteed stop loss at any time providing it is still 10% away from the current level. The initial premium for a guaranteed stop loss is % 0.5 payable once at initial trade entry.
Financial-Spread-Betting: What level of leverage do you offer as standard? I believe that one of your biggest selling points is leverage.
Andy: On shares we offer two margin rates; 3% for FTSE 350 shares and 20% for all other UK stocks. US and European shares require a 10% margin.
For each £1 traded, the following examples of our margins apply:
FTSE & Dax daily £30
FTSE & Dax fut. £50
Dow daily £80
Dow fut. £100
Gold & Oil fut. £50
Financial-Spread-Betting: What are the minimum/maximum stakes?
Andy: Minimum Bets for UK shares are:
£1 if the share is over £15 (1500)
£2 if the share is between £10-£15
£3 if the share is between £6-£10
£5 if the shares is between £3-£6
£10 if the share is between £1-£3
£25 for shares between 50p and £1
£100 if the share is under 50p
The margin for FTSE 350 shares is only 3% and for non 350, 20%.
US shares are generally £1 but Google is only 25p because of its huge handle.
We do not have maximum stakes which is why we have a growing reputation for accepting the biggest stakes.
Financial-Spread-Betting: What is the minimum deposit required to open an account? Is there a maximum deposit?
Andy: There is no minimum or maximum deposit. In fact you can trade with no deposit if you open a credit account.
Financial-Spread-Betting: Are accounts denominated only in GBP or can clients also trade in USD or EUR? Do you accept international clients?
Andy: All accounts are in Sterling. International clients are welcome although this is usually on a deposit basis unless the client has a UK bank account.
Financial-Spread-Betting: Do you accept deposits by BACS?
Andy: Yes, and also by debit and credit cards.
Financial-Spread-Betting: What is the maximum amount you can lose?
Andy: Losses like profits, are not limited.
Alternative forms of investment such as gold have been very popular as of late, as have the more speculative currency markets and oil. Generally clients look for volatility, but traditionally the FTSE and Dow markets are the most popular. 
Financial-Spread-Betting: Do you offer credit facilities? Can accounts be overdrawn?
Andy: We do offer credit subject to status. This is governed by the credit searches done on an individual as part of the account opening process. This will dictate their ability to trade as clients are allocated a Spreadex credit rating. Credit betting is offered up to a maximum of £100'000. This is of course (subject to status) and not possible for all clients/potential clients.
Accounts can be overdrawn again subject to status. Status might include a payment plan, known assets, repayment history, ease of communication, market experience etc...
Financial-Spread-Betting: What happens when a position requires more margin to keep it open, please also comment on your rollover protocol.
Andy: If the product concerned is a daily rolling, clients are expected to monitor positions approaching the close. In the event a client has insufficient funds, we will try to make telephone contact. If this is not possible, the position will be closed.
At the quarterly rolls, we always aim to contact our clients to explain their options. As above, if the client has insufficient funds and is not contactable the position will be closed.
Financial-Spread-Betting: Which commodities are most popular at the moment?
Andy: Alternative forms of investment such as gold have been very popular as of late, as have the more speculative currency markets and oil. Generally clients look for volatility, but traditionally the FTSE and Dow markets are the most popular.
Financial-Spread-Betting: Do you offer trading of small cap UK equities? What would it cost to hold a long position in one of these for say 18 months?
Andy: As mentioned above, we will offer a trading facility for stocks with a market capitalization greater than £7mil.
We have clients who have held futures positions with us in small stocks for a number of years. The cost of commission and funding (the largest component) are deemed to be more than offset by the low and consistent margins, the tax free capital gain advantage, credit availability and quality and flexibility of service.
Financial-Spread-Betting: What sort of stakes are your clients trading for? Where is the bulk of the action?
Andy: The most popular markets are the FTSE, Dow and Dax indices and small non FTSE 350 shares followed by gold, oil and currencies principally £/$ and Eur/$.
Stakes that we take on indices range from minimums to thousands of pounds per point on shares and in some cases on indices!
Financial-Spread-Betting: As of now, what trends do you see in the markets people choose to trade? Are there any sectors, contracts, currencies, indices or particular markets where your clients are clearly more or less successful?
Andy: People tend to be more successful trading shares where they can study and understand the influences affecting company performance. Small (AIM listed) stocks are very popular and this looks set to continue despite their liquidity issues. Volatility is the biggest driver of a product's attractiveness to clients.
Financial-Spread-Betting: Do you provide any training for new clients? Are there any virtual trading facilities?
Andy: As part of the account opening process, a client's suitability to trade is assessed. Each customer is given a welcome call by our back office which is followed up by a call from a dealer to establish a personal contact or account manager. In some cases a client might request or be advised that a meeting might be appropriate to provide additional information or assist in KYC. This 'personal service' is available to any Spreadex client.
Training can be a double-edged sword as everybody is different and everybody reacts differently to situations. A reaction to a dummy trade will more often than not be very different to a live trade especially if someone else is expressing what they would do under specific conditions.
Financial-Spread-Betting: Are there any other fees which our readers need to be aware of besides the spread? Do you charge a quarterly trading account fee or an account inactivity fee or a fee for spread bets made over the phone...etc?
Andy: There are no other fees except the possibility of interest being charged in the event of a late settlement of a debt. The client will be informed of this prior to the charge being levied.
Financial-Spread-Betting: Are traders who trade bigger amounts or more frequently eligible for discounted commission rates or other perks?
Andy: Yes.
Financial-Spread-Betting: Is interest paid on the balance of the accounts?
Andy: We pay a very generous 10% pa interest on deposits if you trade more than 3% of your deposit in opening stakes each month...
Financial-Spread-Betting: Are there any general safeguards for clients - protected accounts for clients' money or segregated accounts...etc?
Andy: All client money is held in a separate segregated account as we comply with all Financial Services Authority rules...
Financial-Spread-Betting: Are there traders who make a living through spread betting at Spreadex? What is the trading style and methods that these traders use for winning consistently?
Andy: We have a number of clients who make a healthy living through spread betting. More than a particular style these traders are much disciplined...
Financial-Spread-Betting: Do you hedge the client aggregate positions or bear the risk yourse?
Andy: We hedge by buying or selling in the underlying cash market for shares, and in the relevant futures market for indices...
Financial-Spread-Betting: The online spread betting market is very dynamic. Looking ahead, is it likely to get harder for leading spread betting providers like Spreadex to differentiate their spread betting offerings from other competitors. Do you see more spread wars ahead?
Andy: For many clients, the attractiveness of spread betting is based on the prevailing tax legislation which is changing in April '08. That aside, it is still a fast growing industry and as such is attractive to new entrants making spread wars a possibility. However, the dramatic increase in volatility seen since the start of the 'credit crisis' has lead to some of the market participants to reassess their model's risk/reward profile. It is perhaps more likely for market participants to narrow their areas of expertise rather than be all things to all clients; i.e. tight spreads and low margins in all markets. This could be targeting a specific client group, product, other derivatives products etc...
Financial-Spread-Betting: This concludes our interview with Andy Mackenzie of Spreadex. Please feel free to browse other articles on this site and come back next week for our next exciting interview. If you have any questions regarding this interview or would like to suggest an interview, please contact traderATfinancial-spread-betting.com
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