ProSpreads Trading Platform: Scalpers Paradise?

Originally launched in 2005, ProSpreads (formerly known as FuturesBetting) provides experienced traders with a professional trading platform, offering spread betting execution on major indices, currencies and commodities. FuturesBetting was acquired in May 2008 by London Capital Group and is now again open for business trading as ProSpreads.

ProSpreads Ltd is a company registered in Gibraltar and is authorised and regulated by the Financial Services Commission (Gibraltar) to conduct investment services which provides them with a 'Passport' to trade in the UK. Their customers can bet on the movement of financial futures and commodities traded on the CBOT, CME, EUREX, LIFFE and IPE.

Simon Brown, Chief Executive Officer

Simon Brown has been involved in the spread betting industry for the last 5 years having started the first white-labelled spread betting firm. Earlier he was a professional trader on the bustling London International Financial Futures Exchange (LIFFE) where he stood, waived his hands and shouted for 12 years. His derivatives market experience helps him better understand the needs of the professional trader. Simon is now CEO of ProSpreads. Check our interview with ProSpreads here.

Our hands on experience of ProSpreads backed by reader comments, general experiences and observations -:

General Points (we will strive to keep this review up-to-date)

This is NOT a firm for newbies, the application process requires previous experience, ProSpreads is mainly suited to professional traders that want to scalp the markets or day traders. In addition, your account must be £1000 minimum. A good thing all in all, to dissuade chancers with credit cards.
Here you are actually trading the futures with a spread betting wrapper, in other words the platform has a 'Fix' protocol connection to the underlying market. So you are in fact trading with Direct Market Access. Prospreads is not strictly a market maker as they hedge all trades against the future market.
A demo trainer platform is available which has live prices to the exchanges, but your orders obviously don't get placed onto the live market. Platform is based on the Citrix platform, which is very fast. If you require assistance the support guys I believe can view your screen, possibly even control it to show you how to do things. Main features can be customised and you can save the layout so that it opens the same each time.
Bets are in lots not points (as in futures) - the minimum bet is 1 lot (a futures contract) so there are different values per point, FTSE is £10 per point, Mini Dow is $5 per point per 1 lot. The good thing is that the spreads are FIXED either side of the futures price.

They have a sliding scale of spread width depending on the volume traded. ProSpreads widens the underlying by 1/2 point (half a point) on entering and half a point on exiting a trade (Spread Charge). So with a typical underlying spread of 1/2 point (half a point), the ProSpreads spread bet price will be 1.5 points. However for volumes over 200 lots a month, the spread charge halves which means that the FBc spread bet price will be just 1 point. ProSpreads only offers one price, which is equivalent to a daily rolling spread bet but with no interest charge, which is a big benefit! Bets are available on the same terms as above as long as the underlying Futures market is open. For the Dow the commission works on a 5 point spread on the first 200 lots then 3 point spread (includes underlying spread of 1 point). What I particularly like is that the spreads are fixed and filled instantly.
FTSE margins are £3500 for a £10/point spread bet; however for daytrading (i.e. no overnight positions) 5X gearing is available, so £700 margin for an equivalent £10/point spread bet. Dow margin is £2300 for a $5/point spread bet; once again ProSpreads would offer 5X gearing on this. 5X gearing is now actually possible on all products for day trading.
Range of markets include indices, currencies, commodities, bonds and interest rates. Very recently they have also launched a new equities trading platform allowing customers to bet on individual stocks on the FTSE 100 and Eurostoxx 50.
With ProSpreads you will be able to trade spreadbets on the following currency pairs: $/euro, $/£, S/Canadian, $/Yen, $/Australian, $/Swiss.
Minimum stake is equivalent to the minimum hedge in the futures market is e.g. FTSE is £10 per point.
Normal Stops and Trailing Stops are available (no guaranteed stops).
The platform is unavailable for USA clients.
Being FSC registered registered (i.e. Gibraltar Financial Services Commission as opposed to the UK FSA) is not a cause for concern as I have been assured by an FSA regulated financial advisor in Spain/Gib/UK - the FSC has the same high standards as the FSA. It may help to know that while the regulatory regime in Gibraltar is easier to comply with than that enforced by the FSA, the FSC, Gib's equivalent of the FSA, is fussier about who gets to play there.
In a revealing conversation ProSpreads have stated that they are located in Gibraltar because as non proprietory traders (unlike UK spread betting firms) there is no ability for them to right off losses against tax, they're intermediaries and don't have the luxury. UK spread betting providers are playing the markets themselves against clients, so fit into another type of business model, ProSpreads would be penalised under mainland Tax codes.

Good Points

This company looks very interesting, unlike other spreadbetting providers you have live exchange quotes for the prices, and pay a commission which is typically less than 1 point per trade. They are fully hedged, as opposed to creating their own market. Level 2 is also available which I think anyone daytrading has to have.
Absolutely no issues at all in getting fills. Instant split-second execution. If you are a professional scalper and trade fast markets you will find no better tax free platform on the market. But if you position/swing trade, CapitalSpreads or any other spread betting provider will suffice.
This is the first spread betting company which actually quotes you futures prices (tiny spreads). They close all your trades in the market so no biases and dodgy fills - because you can view the depth of the market. It is also API computer linkable I believe for auto trading. So all in all quick execution without any re-quotes with the transparency of the system being further enhanced by the company's Ladder order, which displays the orders above and below the current traded prices (the system even supports functionality to input limit and stop orders directly onto the Ladder).
The basic spread is competitive with other spread betting companies and the lowest spread for high volume traders is better than IB (InteractiveBrokers). All funds are held in Barclays London and in 100% client segregated accounts.
No interest is charged on running a position overnight long or short. But you have to have enough funds in your account to run the position overnight.
Closing positions is no different - it is instantaneous with no waiting or re-quotes even in a fast market as ProSpreads takes its spread betting prices direct from the underlying exchange). With ProSpreads your spreads are fixed so you know what you're paying on top of the market price - which is actual market price as I have tested this against my old TT platform. There's even a pull all positions button which will close all your positions instantly.
Direct Markets Access functionality with the ability to see the underlying market prices and joint the Bid/Offer. No restrictions on where orders can be placed. Live charts and live squawk.
I called them at 8pm UK time, and there was still someone manning the phones. Very friendly customer service.
ProSpreads is a platform designed to handle day traders and scalpers. A demo platform is offered but don't forget that the demo account is just that - I had problems at first setting it up as the platform is miles ahead of the norm. But once you're ok with it I think you will change your mind.

Bad Points

Minimum account balance though is £1,000. However, you probably need to deposit at least £3k in so you don't get called when you have a losing trade. The reason they have this minimum (this used to be 5k!) is because you are betting in lots. So 1 FTSE lot - £10 per/point. And since they hedge all positions into the market they have to enforce exchange margins with massive margin requirements. So to hold a FTSE 1 lot position overnight you will need £3,500 or £700 intraday. Also, you are not forced to tie a stop with your position which is why the deposit has to be sizable.
The trading system is first class, but they do aim for clients at the top end of the spreadbetting ladder and not beginners so the platform can look a bit daunting at the start. So it will take sometime to get used to but they will simplify it for you and you can introduce all the bells and whistles when you require them. Be careful as the system is very fast like the real ECN platforms, be careful...
One of the few real drawbacks for new traders is that position size must match the size of in lots of the futures contract being traded, so not really suitable if you normally trade 1 pound per point. Also, ProSpreads only fills the client IF there is an offer on the other side. Not everyone wants to trade in €25 a point on the Dax or a tenner a point on the FTSE and have to put up £2500 for the pleasure. Of course for anyone who wishes to spread bet larger sizes, and/or scalp momentum they look great and could save you a fortune on spreads.

Comments: If you have an account to trade full size futures contracts or FX lots, have a look at ProSpreads. They operate a different model to most 'spread betters' - it feels like direct access trading (or Currenex for FX) through a glass wall. No requotes, because you're trading either market spread or Currenex spread, and whenever I've needed help it's been right there on the phone. Their interest is similar to direct access shares brokers - they make money from volume, not trading against you. In addition to trading higher amounts than the average retail client, Simon Brown noted that ProSpreads benefits from the fact that many of its spread traders are savvy. As such, they are much less likely to lose their money and stop trading. They are also planning to introduce Mini FX lots this year (2011).

Verdict: ProSpreads would seem perfect for professional day traders and scalpers that deal on the futures exchanges and pay tax. Excellent scalping interface with tight spreads (circa 1 pip on the FTSE). Every trade is executed in the underlying futures market (no re-quotes) and they make their money in the spread so they never trade against you the customer. This is an excellent model and is sure to catch on. Only very experienced traders need apply!

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Please note that here we are only giving an account of our experiences and readers comments/contributions, please do not take this as advice to open/close/avoid any firms - your experience might be different!