Hexed: Contrary to expectation on the part of the market, Mr Rollen of Hexagon AB was yesterday evening publicly found not guilty. The effect was an inevitable 5% rise in Hexagon AB’s share price this morning. However, this still leaves Hexagon AB a clear short above 400 Euros. The balance sheet is appalling and the valuation stratospheric.
The great spread betting review was announced by the FCA yesterday morning. I did not read it. But to judge by press commentary there is a delightful mess in place.
The first point is that CFD is not of itself anything to do with spread betting. CFD is merely a means to leveraged trading and, most importantly, short-selling since stock can be borrowed. Nakedly, profits and losses are taxed under the standing income and capital gains tax regime.
However – and here the difference is very distinct – spread betting arises through the offeror of the spread putting up a two way spread with the implicit question: what do you want to do? Buy or sell? Further it is offered by a firm that is a bookmaker and holds a bookmaking licence. The significance is that the bookmaker in question does not owe any duty of care to the punter other than settling. And gains or losses are not liable to taxation or can generate loss relief.
Of course, there are all sorts of ways of dressing up this conduct. For instance, the SB firm may advise the punter that, absent a margin call being met, the SB firm will close the punter out at market. This is fine but in practice the SB firms do not close out positions at market. They close positions out at a price that suits them which is always better for them than market. People known to me have tried to get the FCA to investigate and identify damages due to the punter as a consequence of this fraudulent practice. The FCA refuses to do anything since that would involve work.
It is immediately obvious that a firm which offers very low margin rates has many more opportunities than more abstemious others to carry off the close out trick.
I could go on. But I would be very surprised if the FCA were to achieve anything other than spending a lot of our money on nothing. Here the FCA excels.