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SPREAD BETTING
FINANCIAL TIMES SPECIAL REPORT | Friday December 11 2009
www.ft.com/spread­betting­dec­2009

Clients keep
options open
INSIDE: We report on the first
extensive study of the behaviour
of traders in the UK
2 FINANCIAL TIMES FRIDAY DECEMBER 11 2009
Spread Betting
In This Issue
Fickle
bunch is
Hedging your bricks and mortar
HOUSING Elaine Moore looks at the various
ways of making the most of movements in
hard to
the property market Page 4
Scope for those feeling Browned off
POLITICS With a UK election due by June
please
and mid­term primaries in the US, there
is plenty on which to take a position, reports Matthew Vincent
Huw Richards Page 5 considers the
findings of the
iPhone fever seizes the sector UK’s first survey
MOBILE TRADING Tanya Powley looks at of client behaviour
the rapid growth of trading from portable
devices Page 6
S
pread bets on stock
market indices are
the most popular
short-term trades
among UK private investors,
followed by bets on shares,
currencies, and commodities
– but the one commodity
they put little value on is…
loyalty.
According to the first
extensive study of spread
betting in this country, trad-
ers are now accessing a
Benefit from rising prices wide range of markets, and
INFLATION Placing a bet on the – rising – switching providers to do
so. Three in 10 active spread
consumer price index is one way of getting
betters moved to a new
your revenge, writes Lucy Warwick­Ching spread-betting firm last
Page 9 year, and nearly half say
they are “likely” to change
their main provider in the
Spot the ball competitions abound next 12 months.
FOOTBALL The These findings emerge
from the UK Spread Betting
World Cup takes
& CFD Report, compiled by
place next year Australian research firm
and the Investment Trends from a
Champions survey of almost 9,000 UK
League is investors – including 3,200
current spread betting cli-
drawing to a ents and 750 current traders
climax, which of contracts for difference.
should lead to Based on the responses,
plenty of and data from the providers
excitement, that commissioned the
writes Huw
research, Investment Trends
estimates that 93,000 people
Richards Page 11 placed at least one spread
bet or CFD trade in the past
12 months. However, the
Front page illustration Corbis number of trading accounts
held with providers is far
greater, as clients use sev-
eral accounts for their
trades.
Contributors On average, financial
spread betters have opened
Matthew Vincent Patrick Stiles 2.5 accounts each, and three-
Editor FT Money Commissioning Editor quarters trade actively with
Alice Ross Steven Bird their first provider, a fifth
Deputy Editor FT Money Designer also trade with a second
provider, and 5 per cent
Lucy Warwick­Ching Andy Mears
Online Money Editor Picture Editor with a third. Similarly, CFD
traders hold an average of
Ellen Kelleher For advertising details, 2.2 accounts each, with
Steve Lodge almost an identical distribu-
Tanya Powley contact:
Personal Finance Writers Rachel Padhiar on: tion of account usage.
+44 (0)20 7873 3564; Some traders are opting to
Huw Richards switch providers altogether,
Elaine Moore e­mail:
FT Contributors rachel.padhiar@ft.com given the evolution of trad-
ing services in the past 12
months. Investment Trends
says that the proportion of
spread betting clients exer-
cising this choice – or
“churn”, as it is known in
the industry – is running at
29 per cent a year.
In other words, three in 10
traders took up a better
offer last year. Approxi-
mately 28,000 spread betters,
or 34 per cent, say they are
“somewhat likely” to
change providers again in
2010, with another 14 per
cent “very likely” to.
“The market is extremely
competitive,” says Pawel
Rokicki, spread betting ana-
lyst at Investment Trends.
“Clients are willing and able
to switch providers if some-
thing goes wrong in a serv-
ice sense, or if they find a
better environment else-
where. It’s really a Darwin-
ian environment, leading to
a rapid evolution of product
offerings.”
Diversity is as much a
cause, as an effect, of this
evolution. In the survey, 70
per cent of spread betters
and 57 per cent of CFD trad-
ers said that “access to a
wider range of markets”
was now important to their
trading strategies – with
three-quarters of all traders
looking to take both long
and short positions in these
markets.
Another “key incentive”
for choosing a particular
provider was “the wide
range of instruments on
offer”.
Of the traders who prefer
spread bets as an instru-
ment, 76 per cent currently
trade indices, 62 per cent
trade shares, 61 per cent
trade foreign exchange, and
44 per cent trade commodi-
ties. Of the traders who pre-
fer CFDs, more opt for share
trading, with 83 per cent
taking positions in individ-
ual equities, compared with
62 per cent in indices.
Providers say that this
multi-market, multi-strategy
approach partly explains
why so many clients use
more than one account.
“Spread betters may not be
able to trade a specific mar-
ket at their main providers
and so will naturally look
for a secondary provider
who offers it,” points out
Joshua Raymond, market
strategist at City Index.
But even when it is possi-
ble to access all markets via
a single platform, it can
make sense to use different
accounts for different types
of trading. “Retail investors
have become increasingly
sophisticated, and have
started to open multiple
accounts to test multiple
strategies,” says Chris Hos-
sain, senior sales manager
at ODL Securities.
Davin McAnaney, com-
mercial manager of paddy-
powertrader.com, agrees. “It
helps to have different
‘It’s really a
Darwinian
environment,
leading to a
rapid evolution of
product offerings’
accounts if you are experi-
menting with trading strate-
gies and want to keep them
separate,” he says. “Many of
our clients are using finan-
cial spread betting as a risk
management tool – some cli-
ents like to keep their pots
of money separate.”
Opening multiple
accounts also allows traders
to test out different services.
“Clients are looking to try
out different trading plat-
forms,” admits Matthew
Tooth, managing director of
IG Index. “In the interim,
they may be using two or
more platforms while they
settle on a favourite.”
More experienced traders
will continue to use two or
more, though – to ensure
they get the best quotes and
the tightest spreads, accord-
ing to Manoj Ladwa, senior
trader at ETX Capital.
“With so much choice in the
market, clients have real-
ised that having multiple
accounts allows them to
maximise returns by seek-
ing out best prices,” he says.
Many will seek the best
combination of spreads and
margin requirements for
each asset class they trade,
reckons Andy Mackenzie at
Spreadex.
He says: “Spreads may
vary from firm to firm
depending on the instru-
ment in question. Therefore,
you may find investors
choose a certain firm to
carry out their currency
trading but use a competitor
for their indices trading.”
Opening extra accounts
can be immediately profita-
ble, too, thanks to cash
incentives. This year, ETX
has been giving new clients
£100 to get them started.
“The market is incredibly
competitive at the moment,
with each firm looking to
offer something to set it
apart from the next,” says
Mr Ladwa.
“At ETX, we have
attracted many new cli-
ents… with the only ‘no
strings’ account opening
offer that allows new
account holders to experi-
ence the platform firsthand
with a £100 account credit.”
Simon Denham, head of
Capital Spreads, believes
first-time traders will often

switch accounts just to take
up these promotional offers.
“A classic reason is that a
client new to spread betting
will open an account with a
provider then discover that
he can get a better deal else-
where.”
But once that client has
been trading for some
time, competitive pricing
and platform performance
become more important.
“Our main attractions for
clients is that we have a
strong track history of offer-
ing tighter spreads, lower
margins, cheaper rolling
costs and more robust plat-
form availability,” says Mr
Denham.
Paddy Power also uses
pricing to entice switchers.
“We try to keep our spreads
in the most popular markets
competitive to attract these
experienced clients,” says
McAnaney. “For example,
we run offers such as a
1-point spread on Wall St
trading.”
However, consistency of
pricing is more important to
active traders, argues Mr
Tooth at IG Index. “Last
month, IG Index became the
first spread betting group to
offer a consolidated price
feed that combines the
prices from the LSE and
Euronext, with Europe’s
leading Multilateral Trading
Facilities Chi-X and Tur-
quoise,” he notes.
“This means better prices
for clients and the ability to
access to markets even
when the LSE is having
technical problems as it did
the day the Dubai World
story hit the headlines.”
Spread Betting
Top four UK spread betting providers* Top three UK contracts for difference providers*
Traders using as Traders holding Excluding ‘white label’ services Including ‘white label’ services
‘main provider’ an account
Traders using as Traders holding Traders using as Traders holding
IG Index 30% 50% ‘main provider’ an account ‘main provider’ an account
CMC Markets 9% 22% IG Markets 22% 32% 22% 32%
City Index (including Finspreads) 8% 27% CMC Markets 11% 19% 13% 28%
Capital Spreads 6% 17% City Index 11% 16% 38% 62%
Spread betting in the UK: the big numbers * By primary market share, excluding white label relationships
93,000 83,000 2.5 48% 76%
Number of traders placing Number of active Average number of Proportion of traders Proportion of active traders
a spread bet or CFD trade spread betters accounts held by ‘likely’ to change providers spread betting on indices
in the past 12 months active traders in next 12 months
Source: Investment Trends
Brand loyalty: nearly half of
spread betters are “likely” to
change their main provider in
the next 12 months Reuters
At ODL, technical innova-
tions, such as straight-
through processing (STP),
have proved to be the big
draw – provided the price is
also right. “The only way to
keep clients is by offering
the best technology, the
most user-friendly platform,
the tightest of spreads, and
back it up with first class
customer service,” says Mr
Hossain.
City Index now aims to
attract mobile customers
with its new Apple iPhone
application.
In the next 12 months,
though, the challenge for
providers will be winning
over new traders rather
than fighting over the exist-
ing 93,000.
Paul Inkster, head of prod-
uct at Barclays Stockbro-
kers, thinks client numbers
will go up if the level of
understanding does. “There
is significant scope to
increase the size of the mar-
ket,” he says.
“Education is the key –
giving clients access to tools
that give them the best
chance to operate profita-
bly.”
Loyalty may be bought for
£100, but knowledge is more
highly valued. In the sur-
vey, more traders cited edu-
cation (18 per cent) and a
demo account (22 per cent)
as a reason for choosing a
spread betting provider than
any introductory offer (15
per cent).

Meet a
self-made
millionaire
Josephine O’Donoghue chats with Vince
Stanzione about his self-made wealth, trading
on the stock market and the economy today
W
ith a huge
mansion in
Mallorca,
millions in
the bank and a dream lifestyle,
you’d be forgiven for thinking
Vince Stanzione was some sort
of celebrity. In fact, he made his
fortune by spread betting on the
stock-market and developing his
knack of predicting trends into a
wildly successful trading system.
We decided to find out more.
What is your background
in economics / the stock
market?
I left school at 16 with a few
O levels and managed to get
a job as a junior at NatWest
World Money Centre in Foreign
Exchange in 1985 on the grand
salary of £100 a week. From
there I worked up and in less
than 2 years I was trading
multi-dollar positions for a
large American Bank both in
the UK and then in the USA.
I trained on the job as well as
studying everything I could in
the evenings and weekends.
I was always good with
computers and would use the
banks computers to programme
my own trading systems.
Describe your trading style
Trend following; all my money
both in business and trading
has come from seeing trends
and getting in on them. I don’t
claim to be first in or first
out but the bit in the middle,
which in many cases is a big
bit, is where I make my money.
Also unlike most I don’t mind
making money both from going
short (betting things to go
down) or long (betting things
to go up). In many cases I have a
spread of trades and trade pairs
for example: Short US$ Index –
Long Gold; Short Tiffany & Co.
– Long McDonalds, which was
one of my actual trades in 2008.
How did you develop your
trademark betting style and
method?
It was a build up from the
knowledge I amassed whilst
trading in real life situations. I
have also always had an interest
in psychology and why people
act the way they do. Markets are
all about psychology, crowds
and perceptions – why does a
...in less than 2 years I was trading
multi-dollar positions for a large
American Bank...
barrel of oil cost $40 and
then a few months later it’s at
$147?
It’s all about perceptions,
greed and fear. I read various
books and papers mainly from
the 1900 to 1960 period and
realised that nothing was new in
markets and what happened in
the past would repeat.
How is your method of
training different from
the rest?
Many try to predict and be
clever by calling tops and
bottoms of markets; I trade
with trends and with what’s
happening rather than what
should be happening I have
been around a long time and
seen plenty of people and
systems come and go, yet
I am still here, so that tells
you something. Another main
difference is my systems adapt
to various markets such as
commodities, shares, currencies
and indices – trends are like
fashion; they change and you
need to adapt with them.
How long did it take to
perfect your system?
It’s taken a good 10 years.
I am now at the point where,
while I may make a few
minor tweaks, the core system
has not changed over the last 2
years. While every trader wants
to improve and every day is a
learning process you have to
resist the temptation to keep
messing with what’s working.
What are your predictions
for 2009 – will there be a
crunch for everyone or
interview 109
will you still benefit from
the changing market?
There are always opportunities
in markets, especially for
trading both on the up
and down. I don’t make
predictions; rather I let my
systems tell me what the
trends are. Right now I am
buying agriculture and soft
commodities such as soyabeans,
wheat, corn, coffee and cotton.
After a large sell off in the
second half of last year these
prices are starting to recover.
Can you offer any tips
to anyone interested in
spread betting?
Invest in education (and I am
not saying that just because I
have a course!). I would have
paid anything to have learnt
the information in my course
rather than have to go through
the pain and suffering of losses
to learn it the hard way.
Once you have studied hard,
then start trading with a few
small bets and work up from
there. Also start reading about
psychology, understand your
own, and understand crowd
psychology. n
To find about more about Vince's
course visit www.fintrader.net