By Zak Mir.
You would not believe how much PR spam the Editor of SpreadBet Magazine receives on a daily basis from PR agencies trying to get us to promote the latest and greatest service aimed at spreadbetters. For the most part this gets dumped immediately in the trash folder, but every now and again a little nugget catches my eye. One such email last month had the title of this blog.
Given that I have been prone to believe many of the conspiracy theories in the past about the tricks the spreadbetting firms use against the likes of you and me, this was an email I had to read. Rejected trades, requites and stop loss stoppages are just some of the regular phenomena experienced on spread betting platforms, but my particular bugbear has to be the “phone only” sign in a fast moving market. In fact, this last example actually led me to close an account once.
As it turned out “Is Your Spreadbetting Firm Betting Against You?” was a promo for the latest offering from InterTrader, whose platform I am familiar through Zak Mir Senior. I decided to get in touch with the MD of the company, Shai Heffetz, for I could not believe he would be able to prove that his company was not betting against its clients.
When we spoke I was surprised at how cool Mr Heffetz was in the face of my attempts at cross questioning! Of course, there is a crucial difference between a spreadbetting firm betting against you (or even profiting from your losses!) and one that simply makes its money on the spread. In the case of InterTrader and its new InterTrader Direct venture the message is clear that this service is designed to work with the client.
This is quite different from the rest of the industry. The usual spread bet dealing desk involves the spread betting firm taking positions against its customers (especially the winning ones – see Alpesh Patel’s “How To Win At Spreadbetting”). With InterTrader Direct there is no dealing desk and apparently no conflict of interest, as under this model the spread bet company simply makes money on the spread. It hedges its positions through using the InterBank market rates from multiple sources of liquidity. The added advantage to the client is that the market does not ‘see’ customers’ positions. There is no temptation for stop losses/contingent orders to be targeted should the need to boost liquidity requirements arise for the spread betting company.
So does InterTrader Direct not want its clients to lose? No, the answer from Shai Heffetz is that it wants to “hire and retain” its clients. He was quite categorical about this.
What about if a client makes a lot of money in the market; will any action be taken to “snipe” their bets or tell them their business is no longer welcome? Apparently, without the traditional conflict of interest, the most likely scenario would be a call of congratulations. In fact, it would appear that the no dealing desk model of Intertrader Direct is as close as possible as it gets for spread betting to become like traditional share dealing.
Perhaps the most interesting take out from the conversion was that, according to Heffetz’s own data analysis, only as few as 5-7% of a spreadbetting firm’s customers account for the bulk of the betting volumes at any one time This can be as much as 80%. However, these are the people who are the most problematic for market makers – they are unable to cater for them adequately, due to lack of staffing, inadequate IT infrastructure and poor customer service. The non dealing desk resolves these problems, so the focus is on managing the relationship with the client. Presumably this is rather easier to do, given the way that this spreadbetting company is one of the few that is not in business thanks to its customers’ losses!
It will be interesting to see how the rest of the spreadbetting market place reacts to InterTrader Direct, now that the service launched at the end of October.