London Capital Group to be taken over?

On the 12th of February 2013, London Capital Group in accordance with London Stock Exchange takeover codes has announced that it is a takeover target for three firms; Cantor Fitzgerald Europe, GAIN Capital (better known as UK), CityIndex Ltd. (who operate CityIndex and FinSpreads). The three firms in question have approached the London Capital Group regarding a possible takeover. The announcement has spurred on a flurry of trading in shares of London Capital Group and has seen Slater Investments Ltd. and Legal & General both take on stakes in excess of 1% since the news has been released. 
A possible takeover by any of the three entities mentioned could lead to all of the companies gaining a much bigger market presence in the over-the-counter derivative marketplace. London Capital Group already represents one of the bigger CFD & Spread betting providers in the UK providing White Labels for a number of different companies including tradefair as well as running both Capital Spreads and ProSpreads. 
Previous to this announcement London Capital Group had a poor 2012 and post a small loss of £200,000. As well as posting poor share performance however since the announcement of a possible takeover the share performance has rallied somewhat. For developments regarding the takeover keep an eye on the regulatory news posted by London Capital Group.


Banc De Binary decides to retract CTFC Press Release

Last month we announced that Banc De Binary had entered into talks with the US regulators regarding the regulation of Binary Options in America. Back then we expressed doubts over whether Banc De Binary could become regulated by the CTFC offering Binary Options in the format they currently offer on their platform and it appears that CTFC replied the same kind of answer that we expected them to give. Back then they announced they wouldn’t be accepting anymore US Clients but in this latest statement their position seems to have taken another change: 

“BDB’s representatives issued a press release on January 25, 2013 regarding its operations in the United States. BDB retracts the press release. The release was inaccurate in several respects. BDB has been advised by the CFTC that it is not permitted to market binary options to United States persons. Thus, BDB will not take orders from United States persons. BDB intends to abide by all laws regulations and hopes to obtain permission to do business in the United States. Until then, BDB will not be permitted to offer its products to United States customers. Please check back on our website periodically for updates. Thank you for your patience.”

It appears that Banc De Binary will no longer accept any more orders from customers in the United States, I presume this means that US Clients will only be able to withdraw money from their accounts and will be prevented from placing anymore trades. It appears that the CTFC were pretty resounding with their rejection of Banc De Binary’s inquiry regarding regulation and  they have therefore decided to completely exit the US marketplace before they are possibly brought to court like other firms such Instaforex. 

In exactly what way the original press statement was inaccurate isn’t really properly answered in Banc De Binary’s further statement and just makes Banc De Binary appear rather foolish. It thus appears that Nadex type offerings are going to be the only type of Binary Options offered in America for the foreseeable future.

UFX Markets fined 100,000 Euros by Cysec

I previously mentioned how UFX Markets the trading name of Reliantco Ltd. were fined 100,000 Euros by Cysec, but on the very same day the announcement was withdrawn. However today, the 13th of February 2013 a letter reinstating the 100,000 Euros fine has been released by Cysec, this longer announcement letter goes into greater detail regarding the fine and confirms that this fine is the same as the one issued on the 31st of January. Not details are given to why the original announcement of the fine was withdrawn with the letter stating that: 

The settlement reached is the same as that announced on 31 January 2013 and arises from concerns in the application of the Law regarding among others the organisation/operation structure of the Company. The Company has assured the Commission that all steps have been taken so that full compliance of the Company with the requirements of the Law is being achieved. This should be verified by the Commission at its upcoming inspection of the Company. 

Due to the nature of compromise between Reliantco Ltd. and Cysec, the company has not had to admit to any breach of regulations and it is Cysec’s official position that the company has been deemed not to have breached any regulations.  

According to a representative at Reliantco Ltd. Cysec were concerned with the ‘Company’s disproportionate high growth rate compared to its increase in personnel’ and in response to such concerns Reliantco would ‘In an effort to satisfy CySEC’s requirement the Company shall continue to expand its team of global financial experts at an increasing rate specifically at its Cyprus head office’. This appears to be an omission that Reliantco Ltd. didn’t really have a sufficient presence in the jurisdiction of Cyprus. Many have previously stated the apparent strong links that UFX Markets has to Israel, so now it appears that UFX Markets may have a more permanent base in on the isle of Cyprus. 

However, it is disappointing that Cysec failed to clear up what occurred regarding the first issuing of the letter and its subsequent recall. All in all, the whole debacle has undermined the value of Cysec regulation at least in my eyes. 

eToro fined 50,000 Euro’s by Cysec

On the 12th of February 2013, it was announced that eToro was to be fined 50,000 Euros by Cysec. However this particular fine issued by Cysec was particularly bizarre in nature, with eToro not being fined for current regulatory breaches but rather for alleged breaches of regulation all the way back in 2010. From the Cysec announcement: 

 The alleged weaknesses concerned the organisation/operation structure (articles 18 and 36 of the Law) of the Company in their early operation days (2010) and the Company has since then rectified the alleged weaknesses and is now in compliance with the requirements of the Law.

Such a fine appears very odd considering it has been issued in 2013, nearly three years after the wrongdoing was alleged to have taken place. This can either been seen as gross incompetence on the behalf of Cysec, in no world should it take a financial regulator three years to issue a fine for wrongdoing. Alternatively, the new Cysec policy regarding the back fining of companies for breaches of regulation can be seen as a revenue raising method as alleged in this LeapRate article which accuses Cysec of shaking down brokerages in order to be able to fund itself. Alleging that cuts by central government have led to a decrease in funding for the organization. One certainly hopes that this is not the case and Cysec are just taking a tougher attitude towards the derivative providers operating from the island, however this doesn’t appear to be the case.

eToro have made no public remark regarding the fine and I doubt they will make public comment regarding such a back dated fine, especially considering the announcement from Cysec states that eToro are now in full compliance with the requirements of the Law. This fine seems to be the continuation of a bizarre period of actions from Cysec the regulatory authority of Cyprus. 

Top Five Currency Trades of All Time

5. George Soros vs. The Thai Baht (1997) 
In the years running up to 1997 there were a number of signs that it would be trouble with a number of Asian economies. A number of economists including Paul Krugman attacked the supposed ‘Asian economic miracle’ publishing papers as early by 1994. From 1985 to 1996 the Thai economy had grown an average of 9% every year while keeping inflation in check, however by 1996 times were changing. Many felt the Thai Baht which was pegged against a basket of currencies with the main component being the US Dollar was vastly overvalued. Soros who in 1996 sent members of his hedge fund out to Thailand to undertake research agreed. On the 14th and 15th of May 1997 their Thai Baht was hit by a number of speculative attacks including ones undertaken by Soro’s Quantum Fund. On June 30 1997, Prime Minister Chavalit Yongchaiyudh made a public announcement stating that his government wouldn’t devalue the Thai Baht. Many of the speculators including Soros held that the Thai government were ill-equipped to defend the overvalued Thai Baht triggering a huge sell off of the currency. By the 2nd of July 1997 the Thai government were forced to let the Thai Baht float freely, with the Thai Baht swiftly losing almost half its value. 

4. Andy Krieger Vs. The Kiwi 
The year is 1987 and Andy Krieger is a 32 year old currency trader at Bankers Trust who was about to make one of the greatest currency trades of all time. Krieger was actively monitoring the currencies which had rallied against the dollar following the Black Monday Crash. As investors and multi-national corporations rushed to pull their currency reserves out of the US and into other currencies that had suffered so badly in the market crash, Kreiger came to the realization that some of the rallying currencies would become fundamentally overvalued creating the perfection arbitrage opportunity. The currency which Krieger decided to target was the New Zealand Dollar also known as The Kiwi. Using new techniques developed in part due to the rise of options Andy Krieger took on a massive short position in the currency worth several hundred million dollars. It has been said that the position was in fact larger than New Zealand’s total money supply, this selling pressure and the overall lack of currency in circulation led to a sharp drop in the value of The Kiwi. Which made Bankers Trust then Krieger’s employer millions of dollars, later on Krieger left Bankers Trust to go work for the infamous George Soros. 

3. Stanley Druckenmiller Shorts the Deutsche Mark 
In 1989 the Berlin Wall fell as the Eastern bloc and the Soviet Union began to crumble eventually leading to a Europe free of Soviet oppression. While others were celebrating these events and talking about The End of History some speculators were out to make a fast buck. The fall of the Berlin Wall also signal the reunification of Germany and this had led to a depression in the value of the German Deutsche Mark. This was perfect understandable with East Germany having an economic output of half of the more developed West. However Stanley Druckenmiller took a long position on a possible future rise in the price of the currency. Soros then told to Druckenmiller to increase the bet, buying a total of 2 billion German Marks. The bet payed off and helped the Quantum Fund have a bumper year posting huge returns. 

2. Soros against the British Pound 
The EU treaties of the early 90’s forced members of the European Union into the Exchange Rate Mechanism in order to align the various economies together in order to prepare Europe for the introduction of the Euro. Members of the Exchange Rate Mechanism had to keep their respective currencies above a certain price level against the German Deutsche Mark. Britain’s membership of the ERM was on the condition that the British government kept the value of the British pound above 2.7 Marks. Britain’s attempts to achieve such a feat led to high levels of interest rate and equally high rates of inflation. Many Speculators including Soros thought such an arrangement would hold out in the long run and they were right. This led to many aggressive speculators taking up large short positions in the pound with Soros borrowing heavily in order to take up a huge position in the British Pound. This all came to a head on the 16th of September 1992 when the British Government attempt to prop up the pound Sterling against the currency speculators, raising interest rates to 12% (with further promises to raise the rate to 15%) while also buying billions worth of Pounds. However by 7pm that evening the Government were forced to withdraw from the Exchange rate mechanism meaning that Soros pocketed an estimated $1 billion dollars. 

1. Joe Lewis vs. The British Pound 
Joe Lewis, a reclusive billionaire and owner of British football team Tottenham Hotspurs is said to have made even more than Soros during the Black Wednesday Crash, with some estimating that Joe Lewis made a total of around $1.2 billion Dollars that day. Joe Lewis began currency trading in the 1970’s after selling the family business and is also well known for having lost an estimated $1.1 billion on Bear Stearns in 2007.

CFD’s and South Africa

Trading in South Africa is largely dominated by Single-stock futures with the majority of trading activity on the JSE (Johannesburg Stock Exchange) being the trading of these future contracts. In 2007, Single-Stock futures accounted for 80% of all contracts traded on the exchange making South Africa one of the worlds biggest Single-Stock futures market places. However the dominance of Single-Stock futures is increasingly being brought into question with increased demand from consumers for Contracts for Difference.  

However there is a caveat  currently over the counter instruments such as Contracts for Difference aren’t available over an exchange as in Australia nor are they regulated by South Africa’s financial regulators the Financial Services Board. This introduces the problem of counter party risk in a serious way. This has led many South African traders to be very cautious about which CFD brokerage they trade with and in what size they trade. However there has only been one example where the company defaulted on its obligations though it was a pretty big default to the tune of 167 Million Rand. Which for many makes trading CFD’s a much more risky business than trading the already regulated Single-stock futures market.  

The news isn’t all bad for South Africans wishing to trade Contracts for Difference, as number of regulated European brokerages have made the foray into the South African marketplace. Not so long ago well known industry player IG Markets completed their acquisition of South African Contract for difference brokerage Ideal Markets. Ideal Markets now trade IG Markets South Africa with the company operating an office in South Africa.  A number of other European regulated brokerages also accept clients from South Africa meaning that traders are able to trade Contracts for difference through a regulated brokerage.  

However steps are being made to regulate the South African derivative markets and the proposed Financial Bill of 2011 would take the first steps toward regulating the over-the-counter derivatives market. Though at the time of writing their has been no change regarding the regulation of Contracts for difference which are still an unregulated financial instrument. 


Made To Trade’s: Top 5 Trading Documentaries– What we here regard as the best 5 Trading Documentaries, some very interesting documentaries on this list.   

Floored is a documentary looking at the death open outcry trading and is available to watch free online at Babelgum. A worthwhile watch for anyone who has an interest in trading and the history of financial markets. 

The Black-Scholes Formula is a good documentary produced by the BBC on the Black-Scholes Formula and it’s effect on options trading and how it lead to the collapse of mammoth hedge fund Long Term Capital Management.


Spread Betting Review: tradefair

Important Facts 
  • Regulation: tradefair is the financial spread betting arm of well known betting exchange and fixed odds bookmaker Betfair. However it appears tradefair is simply a white label platform supported by the London Capital Group who run a number of Spread betting services including ProSpreads and Capital Spreads. 
  • Instruments: Indices, Commodities, Forex, Bonds and Interest Rates. 
  • Features: Decent range of markets and reasonable Spreads. 
  • Minimum Deposit: None Stated, Deposit dependent on the Minimum Margin Requirements of the various instruments. 
The Platform 
As a white label of London Capital Group, the platform offered at tradefair is very similar to the platform offered at Capital Spreads. This is nothing to moan about as the platform on offer at Capital Spreads is pretty decent and the offering at tradefair reflects this. The platform is easy to navigate, with it being easy to open and close positions in any of the instruments offered on the platform. They charting features may be pretty light but they are still functional and will allow a trader to undertake all the different types of technical analysis needed to successful trade the financial markets. The other area where the tradefair platform is pretty basic is when it comes to mobile trading, at the time of writing their was only an iphone mobile trading platform on offer. While the platform was perfectly functional, it is a shame that tradefair only support mobile trading on the iPhone excluding android and Blackberry powered smart phones. 
Special Features 
There’s nothing much which makes the tradefair platform unique in comparison with the other Spread betting platforms offered by companies in the London Capital Group, however many new clients may feel happier dealing with a well known company like Betfair. Thankfully due to the fact that tradefair is powered by London Capital Group clients also have the opportunity to trade a wide array of instruments with very reasonable spreads. 
The Spreads on offer at tradefair are very competitive with Spreads on major Indices such as the FTSE100 being as low as 1 point. While their are a few brokerages that outdo this, including ProSpreads another company part of the LondonCapital Group. However the Spreads on offer at tradefair are pretty competitive with a number of the serious industry players, meaning that tradefair offers pretty good value for money even if they don’t offer the best value for money out there. 
Customer Service 
I have both direct experience with LondonCapital Group and with Betfair. I have to say that my experiences with both companies have been very positive. I would imagine that any experiences people had with tradefair would be similarly pleasant. General opinion on the internet seems to concur with my experiences of the company. This gives me some peace of mind and would probably recommend people consider tradefair as an option when opening a financial spread betting account. 
As a white label of London Capital Group, tradefair are regulated by FSA. The FSA is considered one of Europe’s tougher financial regulators and those who have accounts with London Capital Group will be pleased to hear that they have a completely clean regulatory record with not one penalty against them during the now 12 years that they have been regulated by the Financial Services Authority. 
Overall, while tradefair won’t set the world alight it is a perfectly reasonable place to trade financial spread bets.

CFD Review: CityIndex

Important Facts 
  • Regulation: Regulated by the FSA in the United Kingdom. 
  • Instruments: Indices, Shares, Sector CFD’s, Currencies, Commodities, Bonds, Option CFD’s and Interest Rates. 
  • Features: Wide array of instruments to trade including some more exotic instruments including Sector CFD’s, Option CFD’s, Bonds and Interest Rates.  
  • Leverage: Up to 100:1, some instruments limited to lower amounts of Leverage. 
  • Minimum Deposit: Initial Minimum Deposit of at least £100, further deposits from a £25 minimum. 
The Platform 
CityIndex operates primarily through an online based trading platform which allows you place trades on all of CityIndex’s different instruments online. The platform also supports charting techniques and allows you undertake different technical analysis. While the CityIndex platform is hardly ground breaking it does provide a good basic online platform for those who want to simply trade Contracts for Difference. However, there are no social trading or automated trading features available for use at CityIndex. CityIndex however supports a wide range of mobile platforms meaning that those who have a smartphone should be able to trade on the go with one of the provided platform. While these platforms aren’t the most advanced mobile trading platforms in the world they still provide you with decent access to a wide range of financial markets to trade through CFD’s.  

Special Features 
The main thing that will attract people to trading CFD’s at CityIndex is the wide range of instruments that one can trade on the CityIndex platform. For example at CityIndex you have the ability to trade Option CFD’s, Sector CFD’s, Bonds and Interest Rates, products which are not available one many trading platforms. Personally I feel that both Sector CFD’s and Option CFD’s offer some quite interesting opportunities. The platform won’t be really suited to automatic traders as CityIndex don’t provide functionality for such trading, but it will be great for those who want to access a wide range of markets.  

The Spreads on the CFD’s at CityIndex are very competitive, with a number of Major Indices having Spreads on offer as small as 1 point. The Spreads are equally as competitive across the board and would put a number of well known brokerages to shame. On Stock Contracts for Difference there are no spreads, allowing the trader to trade these markets without the cost of a spread. However, the trader has to pay a quite hefty minimum commission charge or 0.1% on trades were the commission from this would be greater than the minimum commission. This makes CityIndex a great place to trade Shares provided the trader is trading in sufficient size, smaller traders may want to stay away from trading stocks at CityIndex. The Spreads on the more exotic instruments are still pretty tight and do offer some potential for those who wish to trade the instrument. 

Customer Service 
Customer Service at CityIndex is pretty good and provide good live 24/5 support to their customers. CityIndex has a pretty good reputation regarding the level of customer service that it affords it’s clients and I would personally not have any worries regarding depositing money with the company due to the fact that I trust it’s staff looking after my account. All in all, when it comes to customer service I would say that CityIndex are a professional outfit who properly deal with customer complaints and problems when they arise. 

CityIndex is regulated by the FSA the British Financial Regulator. The FSA is considered to be one of Europe’s premier financial regulators and is part of MiFID allowing CityIndex to accept clients from throughout the European Union onto their Contract for difference platform. CityIndex is the trading name of CityIndex Ltd. who have one regulatory breach to their name when they were fined £490,000 for the improper reporting of financial transactions to the FSA. Failing to report an estimated 55,000 transactions at all and further failing to report an estimated 1,970,000 accurately. However since the 2011 breach for improper reporting of financial transaction CityIndex has not received any further disciplinary action and I believe better systems have been put in place for the reporting of transactions. 

Overall, CityIndex offers a good platform for those who are serious about trading Contracts for difference. The slight regulatory lapse in 2011 may give some a cause for concern.