Posted by MoneyWrite on July 14, 2010 under CFD Trading News, Spread Betting News | 
There is a common misconception that Spread bets and Contracts for Difference (CFDs) are immune from the laws that govern insider trading. This is simply not the case. Anyone who is investing in spread bets or CFDs should be doing this because of their opinion on the market, and not through some privileged information.
Insider trading covers all types of trading on financial derivatives, and not simply the trading of the underlying shares as is commonly believed. This has meant that there have been a string of prosecutions of insider dealers who have engaged in insider trading.
As contracts for difference and spread bets are traded off a stock exchange then it can be harder to spot spikes or sudden dips in a share’s value as the prices of the contracts and bets are not published. However there is an indirect effect on a share price as markets tend to equalise, and sudden movements can still be seen.
Companies that provide contracts for difference and spread betting exchanges can often lose money on insider trades, and so tend to be quite zealous in prosecuting insider traders. Authorities used to be more lenient on insider trading on off market exchanges, although as it is commonly recognised that this can affect the share prices on the exchanges this is no longer the case.
Posted by IndependentInvestor on June 30, 2010 under CFD Trading News |
The Financial Services Authority (FSA) has decided that Contracts for Difference (CFDs) have to be regulated more thoroughly.
The Financial Services Authority has had Contracts for Difference in it sights for some time. This is an extension of its crusade to clean up the market in small shares (“small caps”) to small investors. Many of the people who were selling small caps have started to sell contracts for difference.
This new attention may affect some of the smaller brokers who have recently moved into selling contracts for difference, but they are unlikely to affect the bigger players in the market – and the sort of people who appear in our comparison engine.
You may think that the Financial Services Authority is going to be broken up, so this does not matter. However this is merely a headline. What has happened is that the Financial Services Authority is going to be moved into the Bank of England, in 2012. Hector Sants, the head of the FSA is going to be a deputy governor of the Bank of England. Although there are real differences in the approach of the two, there is going to be little effect seen with Contracts for Difference apart from a new name on the door.
The FSA has been moving from its “light touch” regulation for some time, and the Bank of England has never been a fan of this approach. Over time we are likely to see consumer regulations come in for Contracts for Difference (CFDs), although this is going to take some time. However if there is a single scandal in the next couple of years, expect the timetable to be accelerated.
Posted by IndependentInvestor on June 23, 2010 under CFD Trading News |
The way in which the government dealt with Capital Gains tax is one of the most important areas for people who are trading in Contracts for Difference on any sort of scale. Overall the budget has actually been far better than feared.
Before grumbling too much at the capital gains tax changes it is a good idea to consider what was originally proposed. Firstly there was going to be a harmonisation of the rates to the marginal income tax rate. This technical sounding change would have meant a capital gains tax increase in some cases from 18% to 50%. This was a large increase. This would have been made larger by a slashing of the allowance to £1,000 or £2,000 from its present level of a shade over £10,000. As well as increasing the rate would also have brought many of the less regular traders in to the scope of Capital Gains Tax.
Well the capital gains allowance is going to stay the same. In inflation adjusted terms it is a cut, as it is not moving up with prices or earnings, but it is still better than being slashed to £1,000.
For basic rate taxpayers there is also no change. Although the change in tax rate from 18% to 20% would have been small, it is still good that the rate has not changed.
For higher rate tax payers however the rate does move up. However while it has moved from 18% of the gains to 28%, it is still nowhere near the rise to 40% or in some cases 50% that was being put forward.
The government has seen sense on this, not from the point of view of investors, but for the raising of revenue – as a 40% capital gains tax rate would have sharply reduced the amount of investment in the economy and so capital gains being taxed. No one likes paying tax, but it is fair to say about this budget that just about everyone is feeling the pain.
Posted by IndependentInvestor on June 14, 2010 under CFD Trading News, Spread Betting News |
Sometimes it can be daunting to start trading Contracts for Difference or to start spread betting. The very attraction of these forms of share trading, the great gains that can be built up from small movements, also means that the losses can mount up quite quickly.
However a demo account is a very good way of learning the ropes. There are things that should be watched for, and it should be recognised that a demo account is not the same thing as trading with your own money.
A demo, or shadow, account is a “play” account where a person can put in the trades that they think should be made and then system mirrors a real system. Essentially the system will buy and sell at the currently prevailing prices and will show reports to see if the trades would have been profitable or made a loss. This will give a new trader some idea of where their strengths and weaknesses lie.
It must be recognised that there is a difference when you use your own money and when you use a demo account. When it is your own money then emotions can cloud your judgement. Benjamin Graham, the great investment theorist who Warren Buffet claimed to have copied, said that it was not the system that was used that marked out successful investors but the discipline that the successful investors used to keep to a system rather than their emotions.
It is much easier to use a system when it is not your money.
Posted by IndependentInvestor on June 9, 2010 under CFD Trading News, Spread Betting News |
Many people can not trade during work hours. After all we’re paid to work during that time and not trade on our own account. There are some alternatives.
Taking the long view is an obvious but often overlooked strategy for out of hours traders to follow. To take a topical example BP may look oversold on the basis that the amount that has been lost on its share value is three or four times the highest estimate for any cleanup operation. This is a medium term view, which is independent of any short term price movements.
There may be some gains that are being left on the table, but this can be a far better use of the time.
However there are many people who want to take advantage of the quick gains that contracts for difference and spread betting offer, who realise that they can think ahead of the market when news breaks. For these people the shares that are traded on the London Stock Exchange are not a very good option.
However there are alternatives. Big indices, such as the FTS100 index, are traded out of hours. This means that a bet on either the direction of the economy or the health of big companies in general can be made using either spread betting or contracts for difference.
The other market that is always open is the foreign exchange market. These are massively liquid as they are the biggest markets in the world, being the lifeblood of international trade. So instead of shorting oil companies, short the Norwegian Krone and other petro-currencies.