Spread betting and conflicts of interest vs CFD's | Forex Factory

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Spread betting and conflicts of interest vs CFD's

  • #1
  • First Post: Jan 30, 2015 3:37pm Jan 30, 2015 3:37pm
I know similar threads have popped up but wanted to get peoples opinions on this. I'm in the UK and I'm currently deciding between a variety of brokers however my first decision is to decide if I'm looking for a spread betting account or a CFD account.

I've mainly been looking at spread betting accounts because I could potentially save 18 or 28% on capital gains however the potential conflict of interest concerns me. From what I understand when it comes to spread betting either you or the broker sustains the loss when you make a bet. Considering the broker controls the market data you place the bet on this leads me to think it would be a very bad idea to go for a spread betting account as they will do all there best to keep you from winning. Spread betting accounts also typically offer crazy bonuses like Intertrader (10k), ETX (15k) depending on your deposit. These sort of bonuses on offer only emphasize to me that they are counting on you to loose.

In contrast we have CFD's, now providing the broker is ECN and doesn't hedge against your trade the broker is there to only fulfil your trade and does business from commissions or spreads. However with CFD's it is subject to capital gains tax.

What are peoples thoughts on this?
  • #2
  • Jan 31, 2015 6:03am Jan 31, 2015 6:03am
Quoting rjm101
I know similar threads have popped up but wanted to get peoples opinions on this. I'm in the UK and I'm currently deciding between a variety of brokers however my first decision is to decide if I'm looking for a spread betting account or a CFD account. I've mainly been looking at spread betting accounts because I could potentially save 18 or 28% on capital gains however the potential conflict of interest concerns me. From what I understand when it comes to spread betting either you or the broker sustains the loss when you make a bet. Considering...
I don't know if this is helpful but this, apparently successful, Spread Betting trader reckons that companies hedging is not a problem for him:

Another hot argument is whether spread betting companies do or don't lay off their bets. They probably do. To be brutally honest though, I really don't give a tinkers cuss whether they do or don't. I'm only interested in my PnL, not theirs!
Source: http://www.financial-spread-betting....ng-spread.html

Furthermore it does not appear to be a problem for traders on average income of £50,000/year. Of course, £50,000/year may not be that much money for some traders but certainly is more than enough for me!!...lol.. :

According to research by ETX Capital, 90% of spread betters are male, half live in south-east England, and they have an average income of £50,000. Spread bettors are typically men aged 35 to 55 who work in financial circles, often self-employed.
Source: http://www.financial-spread-betting....pread-bet.html

I use to Spread bet but I never made enough money to worry about brokers closing my account...lol.. Now I turned to Forex as I can trade microlots and minilots where with most Spread betting brokers the min stake is £1/pip.

If all these is old news for you I apologise for taking some of your time.

Good luck with your new broker(s)
  • #3
  • Jan 31, 2015 10:28am Jan 31, 2015 10:28am
Thanks blackbird. I'm still on the fence with this one. Intertrader doesn't provide requotes and they are an ECN broker so this would be a small assurance for me I guess.
  • #4
  • Edited 11:26am Jan 31, 2015 10:46am | Edited 11:26am
Quoting rjm101
Thanks blackbird. I'm still on the fence with this one. Intertrader doesn't provide requotes and they are an ECN broker so this would be a small assurance for me I guess.
If by ECN you mean the same as Non Dealing Desk broker, FXCM claims to be a NDD Spread Betting Broker and they trade microlots and minilots on an MT4 and a Desktop. FXCM was my Spread betting broker for years until after the swiss incident where they reduced their leverage from 1:200 to 1:50. I did not have a position on the EURCHF btw. When I checked on Friday the leverage changed to 1:100 so I may trade occasionally with them in addition to my Forex Broker FxPro. I know that lots of traders don't trust FXCM anymore but as long as I keep a small capital with them I should be safe. That's what I believe anyway.
  • #5
  • Jan 31, 2015 11:01am Jan 31, 2015 11:01am
As long as they are regulated by the FCA then your money is as safe as it is in a high street bank. As always, never fund your account with all your money (most trading approaches don't need ALL you money to be avaialable at all time, thats what leverage is for) draw your profits regularly, keep good records of your trading.

I have taken 9000 trades with my spread bet broker and have never had any reason to complain. Weighed against the tax advantages it's a no brainer.
tradewith60
  • #6
  • Jan 31, 2015 11:29am Jan 31, 2015 11:29am
Quoting Black Bird
{quote} If by ECN you mean the same as Non Dealing Desk broker, FXCM claims to be a NDD Spread Betting Broker and they trade microlots and minilots on an MT4 and a Desktop. FXCM was my Spread betting broker for years until after the swiss incident where they reduced their leverage from 1:200 to 1:50. I did not have a position on the USD/CHF btw. When I checked on Friday the leverage changed to 1:100 so I may trade occasionally with them in addition to my Forex Broker FxPro. I know that lots of traders don't trust FXCM anymore but as long as I keep...
If I was going to trade CFD's and only trade forex I would probably go for FXPro but they don't provide market access to indicies and good list of commodities which holds me back as I like to trade where the opportunities are. Regarding FXCM I woulden't go for them considering how they handled the SNB news.

@60minuteman that's my main thoughts too. The tax advantage is too great to pass up. What broker are you using?
  • #7
  • Jan 31, 2015 12:34pm Jan 31, 2015 12:34pm
Quoting rjm101
{quote} If I was going to trade CFD's and only trade forex I would probably go for FXPro but they don't provide market access to indicies and good list of commodities which holds me back as I like to trade where the opportunities are. Regarding FXCM I woulden't go for them considering how they handled the SNB news. @60minuteman that's my main thoughts too. The tax advantage is too great to pass up. What broker are you using?
Hi rjm I am using GKFX, futures, indices, forex, cfd's, fixed spreads, decent customer service. Been live with them for 5 years
tradewith60
  • #8
  • Mar 15, 2015 8:49am Mar 15, 2015 8:49am
It doesn't really matter if you use spread betting or CFD account (well, with CFDs you have to pay CGT), but overall they work in a similar way and in the uk most of the CFD brokers are market makers so it's up to them to create adequate liquidity.
Yes, it's true that most of the time CFD and spread betting brokers will be against you but once they notice that you know what you're doing then they start hedging your bets.
You also have to remember that spread betting industry is very competitive so brokers show more respect and care when it comes to seasoned traders (unlike as it was about 5-7 years ago). If you're a successful trader they will be glad to keep you on the books and hedge your positions while making money off you on the spread and other charges (such as overnight charges).

You have to remember that when it comes to CFD, you have to pay CGT, you deal in the currency of the underlying market and there're a few other things to remember (Source: http://www.independentinvestor.com/s...etting-vs-cfds).
  • #9
  • Mar 15, 2015 9:08am Mar 15, 2015 9:08am
I spread bet daily there's no point in cfd's unless you like filling tax returns in (assuming profitable). Been with same mm around 10 years no problems. Most retailers lose because they put stops too close to entry or at obvious s/r levels. Keep account under 50k with UK registered 'broker' and use manual stops. Good luck.
  • #10
  • Mar 15, 2015 9:22am Mar 15, 2015 9:22am
Quoting claudia1
I spread bet daily there's no point in cfd's unless you like filling tax returns in (assuming profitable). Been with same mm around 10 years no problems. Most retailers lose because they put stops too close to entry or at obvious s/r levels. Keep account under 50k with UK registered 'broker' and use manual stops. Good luck.
Hi Claudia, I think trading with manual stops does not work for everyone. For me it does not. You come to the point where you say: Hm, time to close .. oh maybe it turns ... oh no I should close ... oh it turns again ... oh now it is expensive, I better close ... oooh it turns lol ... my solution was deleveraging and using stops that I am more comfortable with that get me out when the market proves me wrong.
Fix up, trade sharp ...
  • #11
  • Mar 15, 2015 9:27am Mar 15, 2015 9:27am
Quoting Hickson
{quote} Hi Claudia, I think trading with manual stops does not work for everyone. For me it does not. You come to the point where you say: Hm, time to close .. oh maybe it turns ... oh no I should close ... oh it turns again ... oh now it is expensive, I better close ... oooh it turns lol ... my solution was deleveraging and using stops that I am more comfortable with that get me out when the market proves me wrong.
Hi fair point.
  • #12
  • Mar 15, 2015 9:27am Mar 15, 2015 9:27am
Quoting claudia1
I spread bet daily there's no point in cfd's unless you like filling tax returns in (assuming profitable). Been with same mm around 10 years no problems. Most retailers lose because they put stops too close to entry or at obvious s/r levels. Keep account under 50k with UK registered 'broker' and use manual stops. Good luck.
claudia, now £85k is protected by fscs... and you're absolutely right, one should only trade with fca regulated brokers.
  • #13
  • Mar 15, 2015 9:30am Mar 15, 2015 9:30am
Quoting Saroman
{quote} claudia, now 85k is protected by fscs... and you're absolutely right, one should only trade with fca regulated brokers.
Not on fx it's 50k sterling. 85k applies to bank/savings accounts.
  • #14
  • Mar 15, 2015 9:59am Mar 15, 2015 9:59am
Quoting rjm101
From what I understand when it comes to spread betting either you or the broker sustains the loss when you make a bet. Considering the broker controls the market data you place the bet on this leads me to think it would be a very bad idea to go for a spread betting account as they will do all there best to keep you from winning.
That's what many people believe.

In reality, it's not quite as simple as that logic appears to suggest.

Many of the UK spread-betting firms are laying off their own collective liabilities (continually recalculated by their in-house software) and making their profit mostly from the spread. I don't claim that they all do that, all the time, including all of their customers' positions in what they consider their "own collective liabilities", but I think you can see that to the extent to which they do that, there isn't really a conflict of interest at all?

In my opinion, they also tend to be rather better regulated, and to have rather smaller spreads, overall, than "forum conversations" generally credit them with.

The tax saving, if you're profitable, is enormously significant, of course.

Ultimately, it's something we each decide for ourselves.
  • #15
  • Mar 15, 2015 10:43am Mar 15, 2015 10:43am
Quoting claudia1
{quote} Not on fx it's 50k sterling. 85k applies to bank/savings accounts.
Oops, my bad, you're absolutely right as we're talking about fx here and not bank deposits so it's up to 50k.
  • #16
  • Nov 17, 2020 4:12pm Nov 17, 2020 4:12pm
Quoting rjm101
I know similar threads have popped up but wanted to get peoples opinions on this. I'm in the UK and I'm currently deciding between a variety of brokers however my first decision is to decide if I'm looking for a spread betting account or a CFD account. I've mainly been looking at spread betting accounts because I could potentially save 18 or 28% on capital gains however the potential conflict of interest concerns me. From what I understand when it comes to spread betting either you or the broker sustains the loss when you make a bet. Considering...
looks like not many use financial spread betting for trading anymore.
  • #17
  • Last Post: Jan 12, 2021 1:51am Jan 12, 2021 1:51am
Fixed spreads vs floating spreads- What works better for you?
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