The Exchange - July 2011 - Full Edition by EXCHANGE MAGAZINE

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BETWEEN THE TRADING

FLOOR

AND THE

FINAL

SCORE...

in Spread Betting FOREX AND CFDs

issue 9 JUL 2011 £3.95

Celebrity Traders: Mark Ronson and Alicia Keys

The Eurozone Crisis

Stepping through a forex trend

The summer’s best travel gadgets

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THE OPEN | WELCOME

EDITOR’S LETTER EDITOR Alex Hammond ART DIRECTOR ALEJANDRO GUERRA-PALACIOS

Well, its finally here After THREE months of preparation, explanation and dedication The Exchange’s Top 50 is complete. Many names were put forward, but when it was all over only a few remained standing, the Top 50. First of all, I’d like to thank everybody who’s helped put this list together in any way, because without your input it simply wouldn’t have been possible. We received hundreds of nominations, and thousands upon thousands of votes, so thank you all for supporting the cause. It’s been a long slog, hopefully we’ve done your efforts justice. We’re sure that everyone will have their own thoughts on who should have been placed higher or lower on the list, from the sheer volume of voting it’s obvious that opinions on the matter

are very strong. But if the list sparks debate, even controversy, then we’ll consider it a job well done. And for those who thought they should be higher, well there’s always next year. And with forex strategy, sports spread betting analysis insight and commentry on the escalating Eurozone crisis, as well as our guide to The Global Party (a fantastic event you have to get involved in) and luxury travel gadgets, this issue is packed cover to cover with everything else you need to know about spread betting this month. Anyway I know you’re all dying to find out who’s come top of the pile, if you haven’t had a sneak peak already. I won’t delay you any longer. I hope you enjoy the issue.

Writers & CONTRIBUTORS SANDY JADEJA NICK BEECROFT DECLAN FALLON KEN FISHER ALASTAIR McCAIG MARK SOUTHERN Alessio Rastani Michael Hewson Peter Webb TOM ROTHERHAM CHRIS SMITH ZOE FIDDES SIMON SMITH GREG MICHALOWSKI ATIF LATIF SVETOSLAV GEORGIEV STEWART COLLINS EVE LAWRENCE SARAH MCARDLE DIGITAL CONTENT & MARKETING ANDREW CAPEL Public Relations Mark Southern Polygon PR SOCIAL MEDIA MANAGER Simon wiltshire SUBSCRIPTIONS subscription@theexchangemagazine.com

PUBLISHED BY The exchange

admin@theexchangemagazine.com

ISSN: 20472625

ALEX HAMMOND EDITOR

4 | THE EXCHANGE | July 2011

© 2011. The Magazine is published by The Exchange. All rights reserved. The publishers declare that any publication of any advertisement does not carry their endorsement or sponsorship of the advertiser or their products or services unless so indicated. Contributions are invited and, whether or not accepted, submissions will be returned only if accompanied by a stamped addressed envelope. No responsibility can be taken for drawings, photographs or literary contributions during transmission or while in the Managing Editor’s hands. Proof of receipt is no guarantee of appearance. In the absence of an agreement, the copyright of all contributions, literary, photographic or artistic belongs to the The Exchange. This publication (or any part thereof) may not be reproduced, transmitted or stored in print or electronic format (including, but not limited to, any online service, database or part of the internet), or in any other format in any media whatsoever, without the prior written permission of The Exchange. The Exchange accept no liability for the accuracy of the contents or any other opinions expressed herein.

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CONTENTS

contents 24

THE OPEN 14 UPS & DOWNS 14 CELEBRITY TRADER: MARK RONSON & ALICIA KEYS 20 NETWORKING: FTBN

FEATURE ARTICLE 24

THE TOP 50

THE LONG 52 54

THE EUROPEAN TRAIN CRASH EURO CRISIS: CHALLENGES & OPPORTUNITIES 58 ANALYSIS: FTSE 60 TRADING CFDs WITH DMA 62 KEN FISHER 64 THE ESSENCE OF FOREX 66 STEPPING THROUGH A FOREX TREND 68 THE RELATIV E PRICE INDEX 70 CHART WONK 72 TIME IS MONEY 74 ANALYSIS: SPORTS BETTING

THE SPREAD

78 80 84 86 88

NIGHTCLUBS CITY GUIDE: BASEL GADGETS RESTAURANTS STYLE

THE CLOSE 92 96

6 | THE EXCHANGE | July 2011

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THE OPEN | WHERE DO YOU TRADE?

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IN THE OPEN UPS AND DOWNS NETWORKING CELEBRITY TRADER

“I was only exploiting a loophole” A former stockbroker has been hit with a massive £700,000 fine by the FSA this month, after it concluded that he had manipulated the markets to profit through a number of spread betting platforms, most notably City Index. Barney Alexander’s method was a simple one; by placing a number of small orders on the stock exchange he could briefly alter index prices whilst simultaneously wagering the same prices on the spread betting platform. When the scheme, which Alexander named “System X” was discovered, he claimed he had no idea that what he was doing was outside the FSA’s permitted market conduct, and that he was merely exploiting what he

10 | THE EXCHANGE | July 2011

believed to be an inefficiency in the spread betting system. Unsurprisingly the FSA saw things differently, describing Alexander’s actions as “deliberate and repeated over a significant period of time”. He was ordered to £323,000 in restitution back to firms who had suffered losses through the scheme, of which over £300,000 was awarded to City Index, and had another £306,000 still held in spread betting accounts forfeited. He has also been banned from performing regulated functions for a minimum of five years. Mr Alexander maintains his innocence, and has called for greater clarity of the rules surrounding spread betting.

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THE OPEN | UPS AND DOWNS

UPS&DOWNS

From news stories to trading issues, a round-up of the things that have caught our eye this month

Send us your news, views, and unprintable gossip at: editor@theexchangemagazine.com

Tech stocks targeted by short-sellers

Pippa’s on top again Is there no public sphere safe from the clutches of the media juggernaut that is the Pippa Middleton machine? Apparently not, because it was her Royal Hotness who ended up being the talk of the Thomson Reuters Extel awards (and who now graces the page of The Exchange magazine). At the glittering lunch reception at London’s Guildhall for the annual wards, over 300 industry analysts and their guests were asked their opinion on various future events. Some questions were industry related, for example where the FTSE 100 would be in a year’s time. Over 75% of those asked had the markets above 5,550, and over a quarter took the bullish view that it would be over 6,000. The future wasn’t so bright for LinkedIn, however, with most agreeing that it would it would be a bear market ahead for the social media site. 20% of those polled believed shares would

12 | THE EXCHANGE | July 2011

be trading at under $10 in a year’s time. Some were more confident: 41% said it would be between $50 to $70, while other raging bulls thought it would be over $100. It floated at $45 and currently trades at $78 after reaching highs of $122. But it was Royal sister-in-law Pippa Middleton who took down the greatest prize of the night, beating off competition from Anne Widdecombe (29%), Sepp Blatter (18%) and Robert Peston (9%) as the analysts’ favourite to replace Cheryl Cole on the American X-Factor. And Pippa might even be interested, after all its not as though these analysts don’t have a record in the prediction line - last year they had Spain winning the world World Cup, that the FTSE would be over 5,500 this week and Portugal needing a bail out by the IMF. So if Pippa does wind up landing a gig sitting next to Simon Cowell, you’ll know where you heard the news break first.

The global IT sector has become one of the biggest targets for short sellers this month, in the most part due to fears surrounding vastly overpriced valuations of a number of high profile flotations, and the worry that these inflated stocks are pushing the markets towards another dot.com bubble. Hedge funds and other short-sellers sold more stocks from the listed US technology sector increasingly more frequently last month, believing that prices are destined to fall once the technology bubble bursts later this year. The poster-boy stock for the second dot. com bubble is currently LinkedIn, whose IPO currently values the social networking site at over $3billion, despite only posting profits of $15.4m for 2010. The LinkedIn IPO has been seen by many as the precursor to an expected flo tation of Facebook late in 2011 or early 2012. If the buying frenzy surrounding the LinkedIn IPO is anything to go by, analysts anticipations of a second dot.com bubble will only strengthen when the mad rush ensues to grab a piece of the much larger and more successful internet company.

THE OPEN | UPS AND DOWNS

Time to Drift Away The City’s newest drinking destination, The Drift, looks set to take London by storm when it opens its doors to the public this month. The Drift can be found in the Heron Tower, making it the perfect location for a quick one at the end of another hard day in the City. However, with sleek vintage décor and a drinks menu that’s the envy of even London’s most reputable drinking

holes, don’t be surprised if just one turns into a whole more, and on a regular basis. Throw in the fact that the two-bar establishment also houses a fine dining retreat and an al-fresco terrace and it’s easy to see why The Drift is already being hyped as the newest place de-jour in the City. I know what you’re thinking, and we’ll see you there.

“Get ready for EU rules” FSA tells insurers Insurance firms must prepare for new European Union capital rules due in January 2013 until they hear otherwise, the country’s top markets regulator said in reaction to talk of a possible delay. The new Solvency II rules face a tight timetable for the highly complex set of rules but the Financial Services Authority (FSA) said it would forge ahead. “We at the FSA will be ready,” the watchdog’s chief executive Hector Sants told an FSA conference on insurance on Monday. “We do require the firms to be ready as well until we hear otherwise.” The FSA is being scrapped next year. Its powers will be divided between the Bank of England and a new standalone Financial Conduct Authority. Sants will head the Prudential Regulation Authority, which will be the new regulatory division at the Bank to supervise banks and insurers like Aviva (AV.L) and Prudential (PRU.L). Solvency II is the largest task facing regulators in the sector, which will change how insurers calculate the amount of capital they need to cover risks on their books. The EU’s financial services commissioner, Michel Barnier, said on Friday he will stick to the 2013 date in principle but there may be a soft phase-in of some elements. “If the European Commission wanted to change the implementation date then that is something we could see coming out of the sheer difficulty of the timetable,” said Julian Adams, head of insurance at the FSA. “We will be ready for whichever date is set,” Adams said.

ETF recruitment growth slows as job market continues to flatten off The employment boom in exchange traded funds appears to have come to an end, according to one the leading recruitment consultancy agencies in the City. Employment in the sector remains well above market average, but is still well down on 2010 figures. Recruitment consultants have expressed surprise at the turn in the market, claiming that they expected the increased numbers of

jobs available twelve months ago to have continued into 2011. Despite the turn in trend, there are still some bright spots for those looking to break into the industry. BlackRock, the largest global provider of ETFs, will be looking for experienced staff to manage an anticipated $2 trillion worth of additional invested funds by the end of 2012. Recruitment in ETF sales also remains high.

July 2011 | THE EXCHANGE | 13

the open | CELEBRITY TRADER

CELEBRITY TRADER Every month CityIndex and The Exchange present you with Celebrity Trader. We take an unsuspecting celebrity, take them to the trading floor, give them some money a little training and let them trade with all profits going to their chosen charity.

Music Makers Mixing it in the Markets This month’s celebrity traders are two of the biggest of the biggest stars in the music industry, Mark Ronson and Alicia Keys

14 | THE EXCHANGE | July 2011

Mark Ronson sits serenely as a king as his courtiers fabricate a hive of activity around him, hurriedly finishing off last minute sound checks in preparation for the evening’s entertainment he will be enthralling crowds with in a few hours time. We’re at the Royal Albert Hall, the venue for the Black Ball, an event Ronson is cohosting with singing sensation Alicia Keys in support of Keep a Child Alive, a charity dedicated to tackling issues of HIV and AIDS amongst children in Africa and India. Of course we’re here to talk about Mark’s time as one of this month’s celebrity traders, but almost instantaneously the conversation turns to music, and it’s immediately clear where Ronson’s passions lie. Consumed from a young age, Ronson’s life in the industry has been a roller coaster that’s seen him rise meteorically, from DJing on the New York underground scene to the summit of the popular culture, an achievement that was crowned when he won the Best Male Brit Award in 2008. Naturally Ronson can wax lyrical over the creative side of the profession, he isn’t one of the most in-demand music producers in the world for no reason, but what is perhaps surprising is the no-nonsense, clued-up approach he has to the financial side of the industry. “Make no mistake, I’m in the music business. We like to think what we do is art, and it is, but it needs to sell records for the labels so you’ve got to be aware we work in an industry,” he says when we ask about the potential conflict between the creative aspects of being an artist and the need to be profitable. But what about investing in others in the industry? Does he think there’s a profit to be made in buying up catalogues of fellow

“If I could invest in the back catalogue of any music artist it would be the legends of music; The Beatles, Led Zeppelin and Bob Marley” professionals? As a man with a finger placed on the pulse of the music trade more securely than almost anybody else out there, surely the concept of hand-picking artists in the same way traders buy stocks must have crossed his mind. “If I could invest in the back catalogue of any music artist it would be the legends of music; The Beatles, Led Zeppelin and Bob Marley. These guys’ back catalogues are incredible, and will always sell. That’s where I would invest,” he says. “If I was going to invest in a current artist then it’d be a massive hip hop star like Jay-Z who is going to sell records for a long time. That being said, the hip hop industry is the most hard hit by illegal downloading so maybe something that mums buy like Michael Bublé would be a more sound investment. Also Adele would be worth investing in,” he adds. Bublé over Jay-Z? Well, you heard it here first, straight from the lips of a man respected on the U.S underground clubbing scene for his unique approach to defining urban music. Now that really is a business decision and a half. Our talk does eventually come back to his time as a celebrity trader, and he’s quick to say it’s something that he’s enjoyed, even though

Simon Jessop

THE OPEN| CELEBRITY TRADER

July 2011 | THE EXCHANGE | 15

the open | CELEBRITY TRADER

TRADER’S VIEW Kishan Mandalia,

Senior Sales Trader at City Index

Mark Ronson Mark Ronson, a product of the digital age, allegedly had his first recording experiences with Pro Tools. “In my main room I’m using a Mac Pro running Mac OS 10.6.7 with Pro Tools HD and a Pro Control desk”, he claimed. It’s a fact, it’s all about Mac, therefore we weren’t surprised to find that Mr Ronson decide to take a long position on the fashionable technology stock ‘Apple’. Incredibly, with the funds he was given, he could only really afford to risk taking 10p per point, and this ironically loses him £12.80. This trade appeared to shake him slightly, as he didn’t hold the position for long. Mark also took at stab at trading the FTSE, always a favourite with our British Celebrity Traders. Mark took another long position, buying in at 5765, but had to succumb to another loss, closing out at 5731. It was an admirable tactic, attempting to buy the dips, but unfortunately he didn’t manage to pull out the show stopper this time. Trading Account total: £2,321 (a £178 loss)

16 | THE EXCHANGE | July 2011

Simon Jessop

Alicia Keys Alicia admitted having no real persuasion on the stock market, so instead of jumping on the safer band wagon of taking a spin on the FTSE or perhaps a slightly more patriotic Dow Jones, she stuck to her passions, music. Although she couldn’t invest in her own record label ‘J Records’ she took the next best thing, Sony (Sony Music entertainment). Unfortunately for Ms Keys, her strategy of ‘buy in the red and sell in the black’ did not pull through on this occasion, as Sony took a dip on the market, obviously due to the fact that she hasn’t released her highly anticipated new album yet. To counter the loss Ms Keys then attempted a rescue and bought into Warner Music at £4 per point. Unfortunately this market, which generally trades sideways but had been climbing this week, suffered a small correction, and her trade took a small loss of £28. Trading Account total: £2,424 (a £78 loss)

he experienced limited success. “The trading was something out of my normal day to day life, but it’s always good to try different things, and was a fun challenge for a good cause.” Trades in technology and the FTSE were his speculations of choice, but a series of unfortunately timed trades meant that he met with little success. Spotting potential in the FTSE, Mark had a go at buying the dips, a bold tactic indeed, but unfortunately one that ultimately proved fruitless. He also went long on Apple, but a 2% drop in share in share price cost him another chunk of his account. Just as our conversation draws to a close

we spot Alicia Keys from the corner of our eye. Despite her hectic schedule the multiGrammy award winning songstress has also been trading with City Index this month, in between organising the Black Ball, putting the finishing touches on her new album and coping with the ordeal of being a first time mum. She also suffered a small loss on her trading account after trading music shares, a fact she was quick to blame on the fact that she was unable to invest in her own record label, J records. Well, once you float Alicia, we’ll all be able to profit with you.

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THE LONG| NETWORKING

Plugging into the Network

20 | THE EXCHANGE | July 2011

THE OPEN| NETWORKING

Tired of faceless telephone conversations and unanswered emails? Is your contact book gathering more dust than Arsene Wenger’s trophy cabinet? Are you keen to meet fellow industry professionals in a relax, social environment? ¶ Well then welcome to the Financial Traders and Brokers Network. Dedicated to providing traders with a platform to increase their contact lists throughout the industry, FTBN specialises in the organisation of social events for financial markets professionals and spread bettors alike. ¶ Wanting to find out more about this exciting new concept, we caught up with FTBN General Manager Kerry Exall to discuss the benefits of becoming part of the network.

Hi Kerry. Just as an introduction, what exactly is FTBN?

FTBN is a network which facilitates traders and brokers with common professional interests to meet regularly and discuss ideas and opportunities within the industry. In contrast to the majority of business interaction, which takes place on the phone or via email, FTBN’s focus is on giving traders the ability to connect in a more direct and preferable manner, face to face. The primary way these goals are achieved is through the arranging of events each month that we invite our existing members and also a number of potential members to in order to sample first-hand the benefits of being a network member. How did the idea for this come about? Did you see a gap in the market?

The idea was born from seeing traders’ frustrations at not being to network in a live environment. So in that sense we definitely saw a gap in the market, and that is reflected in the fact there is no service similar to FTBN currently available to traders and brokers. Aside from online networks like LinkedIn there really is no platform on which people involved in the financial markets can meet other people in the industry, which is where we come in. FTBN is the brainchild of a group of senior brokers and traders with an exceptional amount of experience in the industry and a wealth of contacts, which is why the concept has been able to grow so quickly. How often do you hold events?

Although it isn’t strictly regimented, we are aiming to have at least once event every month.

The last event we held at the end of May was a tremendous success, and our next event in July will be even bigger. How are the events structured? Is there a set format as to what happens?

Each event is unique, but with the same aim of allowing people from across the City to meet in a social setting and have an enjoyable, but also worthwhile, networking evening. We have already held events including drinks evenings, poker nights, and functions with invited guest speakers including celebrated speakers authors and journalists e.g Vince Cable, and this diversity is set to continue this month and beyond. Our members want to network in as relaxed and sociable environment as possible, so that’s exactly what we offer. Are FTBN events predominantly social affairs or professional gatherings?

They’re definitely a bit of both. The purpose of events is to make new contacts, which is obviously beneficially to a trader’s professional career, but the best way to do this is in a social environment. We’ve also had some fantastic guest speakers who have been informative and interesting in giving lectures in their particular field of expertise, but at the same time the bar is always open! What benefits do you get by becoming a member and attending events?

You’ll be able to interact with a whole range of people, some of whom may be extremely valuable to you, that you might not necessarily

July 2011 | THE EXCHANGE | 21

THE LONG| NETWORKING

meet every day. Our membership list is already sizeable but still growing, meaning that the number of personal contacts you can make at an FTBN event is extensive. And because we’re industry specific in terms who our members are, anyone coming to an FTBN event for the first time will know that they’ll have the chance meet similar professionals.

“Our membership list is already sizeable but still growing, meaning that the number of contacts you can make at an FTBN event is extensive”

How easy is it to join as a member?

You can become a member through the online application at our website, or for other membership enquiries we can be contacted our offices directly via telephone or email. Once an application is received it is screened by both FTBN staff and the network’s committee for approval. Anybody can apply to become a member, although each application will be judged on its individual merits. An ideal applicant will already be an established trader or broker, but we also have members who trade individually as a second form of income and City professionals from the periphery of the financial markets industry. Do you welcome industry traders from every spread betting platform?

Yes, and we have already seen an extremely high percentage of spread betting platforms represented at previous events. As a service giving members access to every corner of the industry, we encourage traders to join FTBN from as broad a cross-section of industry competitors as possible. As a not for profit organisation, how do you finance your events?

We have a number of sponsors that we work in partnership with for each event we do. Our last event was sponsored by Ralph Lauren, and the poker tournament we organised earlier this year was sponsored by Victor Chandler. This means that the annual fee we charge for membership is just £95.00, which is a fantastic offer as all of the events are then free to attend. Can members then continue to network outside events?

We have a group on LinkedIn which all of our members have access to, meaning that any contact not made at an event can be followed up online. From our experience we know that many of our members also network away from events after meeting through FTBN. Our role is to give people the opportunity to be in the same room as fellow professionals, away from

22 | THE EXCHANGE | July 2011

events the onus is on members to contact each other. However, because FTBN is a personal organisation, we have managed to facilitate a number of contacts outside of events at the express wishes of those particular members concerned. What advantages does FTBN have over other networking schemes?

All the feedback from members has been incredibly positive, especially in reference to how unique FTBN is in the financial markets industry and how enjoyable our events have been. We appreciate all feedback we receive and tailor future events around the opinions and suggestions we receive, because we believe this is how we can best serve our members. Finally, tell us in one sentence why we should be at the next event.

As far as number of members, industry-specific focus, and face-to-face networking capability are concerned, there simply isn’t another networking scheme to compete with. We are the only organization offering this product in the market.

The events are their own best advertisements, so come down and see what’s going on. Once you come to your first event we’re sure we’ll be seeing you again.

What feedback have you had from existing members?

For more information visit: www.ftbn.co.uk or twitter.com/TheFTBN

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FEATURE

24 | THE EXCHANGE | July 2011

FEATURE

in Spread Betting FOREX AND CFDs

The wait has finally come to an end. The nominations have come in, the voting’s over. Just fifty are left standing. For the past two months The Exchange has scoured the length the breadth of the globe in search of the most influential men and women in spread betting, forex and CFDs; the people who have sculpted the industry into the beast it is today, and the people who will determine where it is going in the future. With no specific criteria and no exclusions, the nominations were countless and varied. Many were put forward, but only a few have survived. It’s been a tough road, but the survivors have truly earned the right to call themselves the industry’s elite. So without further ado, we present the TOP 50. July 2011 | THE EXCHANGE | 25

FEATURE

50 Drew Niv CEO, FXCM Drew Niv has been instrumental in the success of two online foreign exchange firms. Prior to co-founding FXCM, he served as Director of Marketing for MG Financial Group. His efforts were pivotal in transforming an unknown company with less than 250 clients into one of the early industry leaders with over 1000 clients in less than 18 months. Nivâ&#x20AC;&#x2122;s accomplishments at MG Financial Group include building the firmâ&#x20AC;&#x2122;s Sales Department, creating the most popular website for currency trading news, and establishing a network of introducing brokers for the firm. In 1999 he left MG Financial to start FXCM. At FXCM he is primarily responsible for creating and coordinating marketing initiatives, strategic alliances, and personnel decisions. Niv graduated from the University of Massachusetts in 1995.

49 Michael Derks, Chief Strategist, FxPro Michael Derks is the Chief Strategist at FxPro and has quickly established himself as one of the most respected and sought after commentators on events shaping global forex markets. He is regularly quoted in the key international financial publications and often appears as guest host on CNBC and Sky News. Michael joined FxPro in May 2010 having been previously at Deutsche Bank, Rothschild and Schroders. He is a multi-discipline investment and market strategist/ economist with extensive expertise in forex, strategic and tactical asset allocation, fixed income, equities, property and alternative assets. Michael is a proud Aussie sports fan, who is as well known for his love of rugby, football and cricket. With more than 29 years experience in the industry he holds a Bachelor of Economics degree from Macquarie University in Sydney.

48 Simon Denham CEO, Capital Spreads Co-founder of Capital Spreads, Simon joined London Capital Group in March 2003. He has extensive experience of building and running derivatives businesses and in the practical application of derivative pricing and risk models. Simon was COO at LCG from 2005 until 2008 when he was appointed CFO. In 2010 he accepted the position of CEO. London Capital Group specialises in online trading services for retail and professional customers, offering financial spread betting and CFDs, institutional forex and institutional broking. The group has recently made its first steps into international expansion, with Simon overseeing the successful launch of Capital CFDs in Australia. Simon is a widely respected commentator in his field and often appears on CNBC or as a speaker at events.

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Jean Claude Trichet President, European Central Bank As President of the European Central bank, Jean Claude Trichet is highly influential over Euro mentary policy and FX markets, making him one of the most powerful men in the world.

FEATURE

Michael Hewson Market Analyst, CMC

Muammar Gaddafi Libyan Dictator

Michael Hewson is the chief market analyst at CMC markets. Having spent six years as a trader Hewson has been using his industry experience to deliver technical analysis education to CMC clients and further afield for the last 15 years. Able to resonate with traders from all backgrounds and levels of experience, his audiences ranges from experienced traders to private investors, corporate and retail, and academics. Hewson is also a regular public speaker, and has delivered seminars on the subject of Trading and Technical Analysis at the World Money Show, London Business School and London Stock Exchange.

In an industry where volatility creates volume, few people have been more of an influential figure in spread betting over the past six months than Muammar Gaddafi. The Libyan dictator’s actions since a public uprising in the nation he purports to rule have sent markets, in particular commodities, into a spiral, with at least a proportion of the spring surge in oil prices attributable to activities in the North African country. Might not be in consideration for this list this time next year.

James Hughes Senior Market Analyst, Alpari James Hughes joined Alpari (UK) at the beginning of 2011, taking responsibility for further expanding Alpari (UK)’s media presence and the company’s involvement in conferences and web-based events, with a focus on foreign exchange and CFDs education. James is a wellknown market commentator and appears regularly in the financial media, including interviews on the BBC, Sky News, CNBC and Bloomberg television. He works with the most reputable media organisations in the trading industry and shares Alpari (UK)’s insights in Forex, CFDs and precious metals with journalists on a daily basis. James previously worked at CMC Markets for over nine years, most recently as a Market Analyst.

Abdullah el-Badri Secretary-General, OPEC Highly influential in decisions involving levels of OPEC oil supply to the market, which in turn has a direct impact on oil prices. July 2011 | THE EXCHANGE | 27

FEATURE

42 Boris Schlossberg Market Analyst, GFT

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyse market information and use it to trade has helped him become an industry-recognised, “go to” trading professional. Schlossberg is a weekly contributor to CNBC’s Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications such as SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.

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Sandy Jadeja Chief Technical Analyst, City Index Sandy Jadeja is the Chief Technical Analyst for City Index. He has been involved with the financial markets for over 23 years and is a respected and widely recognised analyst and trainer in technical analysis. Sandy has had his commentary featured in prominent media outlets as The Financial Times, The Telegraph, Barron’s, The Australian Financial Journal, Dow Jones News, Reuters and The BBC. Sandy is a weekly guest analyst on CNBC’s Closing-Bell, and provides an exclusive educational course on Technical Analysis for CNBC Europe’s Strictly Money programme. He also features on Cantos TV where he provides weekly education updates on Trading Strategies. Having established a reputation as an articulate presenter and trading mentor on the subjects of trading strategies and psychology, Sandy attracts large crowds of traders and investors to both national and international conferences and world expos. He has participated in and hosted professional panels relating to trading and investing. He was also elected exclusively from the UK in 2005 to speak on technical analysis for the GCC Economic Forum in Dubai. Sandy offers his trading insights, strategies, and provides unique educational workshops, focusing on safer trading, risk control, and money management as part of City Index’s education program.

Nassim Taleb Author, Public Speaker Author of The Black Swan, voted one of the twelve most influential books written since WW2, Nassim Taleb was one of the few men who predicted the financial crash of 2008. Currently lecturing at the Polytechnical Institute of New York and Oxford University, Taleb has also been a hedge fund manager and Wall street trader.

John Bollinger Author, analyst Financial analyst, technical analysis pioneer and author. Developed Bollinger bands technical analysis tools and wrote Bollinger on Bollinger Bands, one of the most influential technical trading books ever written.

FEATURE

John Paulson Hedge fund manager

Clem Chambers CEO, ADVFN

U.S hedge fund manager who predicted the collapse of the Sub Prime mortgage market and consequently made billions of dollars trading credit default swaps. Still manages one of the largest hedge funds on Wall Street. Subject of the book “The Greatest Trade ever”.

Clem Chambers is CEO of ADVFN, Europe and South America’s leading financial forum website. A broadcast and print media regular, Clem Chambers is a familiar face and frequent co-presenter on CNBC and CNBC Europe. He is a seasoned guest and market commentator on BBC News 24, Newsnight, BBC 1, CNN, SKY News, TF1, Canada’s Business News Network and numerous US radio stations.

Alan Greenspan Former Chairman of the Federal Reserve Since taking over as the Head of the world´s most influential bank in 1987 Alan Greenspan has held one of the most powerful opinions in global financial policy. Despite stepping down from his position at the Federal Reserve in 2006 Greenspan is heavily respected in US economics to this today and, still a figure who attracts the media spotlight whenever he speaks out about economic policy, Greenspan’s outspoken views both backing and criticising the U.S Government still hold enough weight to shift global FX and index markets.

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Phil Adler IG Group

Phil Adler’s financial markets career spans three decades. After working for a firm of stockbrokers on the LIFFE floor, Phil went on to join IG Index in 1987 before moving to set up the CFD desk at GNI. Phil returned to IG Group in 2009 to run the UK CFD business, IG Markets.

FEATURE

34 Michael Stumm CEO, OANDA

Michael Stumm is the cofounder of OANDA. He has a Ph.D. in computer science and is a computer engineering professor at the University of Toronto. Michael specializes in distributed and parallel systems, internet technology, and e-commerce, and has contributed his expertise in positions at IBM, Stanford University, the University of Toronto, and the ETH in Zurich. He served as chief technology officer of SOMA Networks (another company he cofounded) from 1999-2003, and served on SOMA’s board of directors from 20022003. Michael has authored more than 100 scientific articles in leading peerreviewed journals and has five published U.S. patents.

Nick Beecroft Market Analyst, Saxo Bank An Honours Graduate from Oxford University, Nick Beecroft brings over 25 years of international trading experience to the financial industry. Prior to his appointment at Saxo Bank, Nick spent five years at Standard Chartered Bank serving, inter alia, as Global Head of Foreign Exchange, and was a member of the Bank of England’s Foreign Exchange Joint Standing Committee. Previously, Nick spent eight years at Deutsche Bank, where he was promoted from Head of FX Sales and Trading in London to Global Head of Spot and Proprietary FX Trading. Nick began his long career in FX as a Graduate Trainee at Citibank in 1981, rising to become Head of FX Trading in London and, subsequently, UK Treasurer. Away from Saxo Bank Nick is one of the most insightful market commentators in the industry. His articles are widely published, and always well received by fellow professionals and traders alike. One of the most respected opinions in the industry.

Barney Frank U.S House of Representatives (D) Barney Frank may not be the recognisable name on the list of the 50 most influential people in spread betting, but don’t be fooled into thinking a lack of familiarity lessens the impact, or potential impact, Frank has in the industry. The progressive Democrat’s name is currently most often associated in the States with the legalisation of online gambling, and in particular internet poker, since the passing of H.R 4777 in 2006. In 2007 Frank put his name to the Bill setting out to legalise online gambling in the U.S, and if successful this will be seen as a key turning point in the potential legalisation of spread betting in the United States as well.

31 David Cameron UK Prime Minister

Head of the UK Government, upon whose decisions foreign exchange and stock markets will react.

July 2011 | THE EXCHANGE | 31

FEATURE

George Tchetvertakov Head of Market Research Alpari George Tchetvertakov joined Alpari (UK) in 2008, bringing a natural ability to analyse market information as well as significant experience in the financial markets to the company. His main responsibility now involves producing insightful market commentary on Foreign Exchange markets for various Alpari clients. Shortly after graduating with Honours in Economics from City University/CASS

Business School, George began his career by trading FX, commodities and equities. In 2005 he was recruited by Refco from a group of 15,000 applicants for a position on their graduate recruit program. After successfully graduating he became a backed financial futures trader for Refco. Since then George has concentrated on analysing market movements, evaluating market risks and working closely with clients to provide a highly professional service to help them attain an edge in the financial markets.

Jack D. Schwager Author, Investment manager Author of the highly successful Wizard trading book series, including Market Wizards, New Market Wizards and Stock Market Wizards.

Hu Jintao Leader, People’s Republic of China

William Von Meuffling Investor

As the head of the fastest growing economy in the world, Hu Jintao represents the increasing degree of power the internal economic actions of China have over global finances, in particular the prices of commodities and the resultant impact on costs for businesses across the world. In addition to this influence over stocks, a free floating of the Yuan (China’s currency) will not only add a number of major currency pairs to the FX markets, but could also have a further enormous impact on commodity prices due to China’s reliance on imports.

For years William Von Meuffling has been well known on Wall Street as one of the most successful investors, and then hedge fund managers in the industry. However, it’s Von Meuffling’s latest speculation, an £80m investment in IG Group, that now makes him a truly influential figure in the UK spread betting market. One of the most well respected and influential men in the world of longonly stock purchasing, Von Meffling’s backing has the very real potential to propel IG Group into the FTSE 100 for the first time.

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FEATURE

Joshua Raymond Chief Market Strategist and Global Head of PR, City Index

Tim Hughes Managing Director, IG Index

Joshua Raymond is Chief Market Strategist and Global Head of PR at City Index. Joshua is one of most widely recognised market commentators in the broadcast and print media. He is one of the youngest associate directors at City Index, being fast tracked through the ranks, and working directly with the company’s board of directors. Having graduated from Durham University, Joshua joined IFX markets in 2005 in a sales trader role. His understanding of the markets saw him begin appearing on CNBC Europe regularly as a commentator and analyst within six months, an undertaking he continues to fulfil today. Joshua contributes regularly to networks such as CNBC Europe, Bloomberg, BBC News and Sky News, as well as mainstream international print media, including Financial Times and Wall Street Journal. Following City Index’s acquisition of IFX Markets in 2006, Joshua became Head of UK Retail Sales and oversaw sales performance hit record levels on a consistent basis. Josh then moved to the marketing department, where he was tasked with redeveloping City Index’s client education programme. In unison with restructuring City Index’s seminar programme and introducing a wide library of educational webinars, Josh developed and launched City Wise, the industry’s first dedicated social media portal for spread bettors and CFD traders.

Tim joined IG Group as a graduate in 2000 and has spent eleven years in the industry, becoming head of sales trading in 2005 and Managing Director of IG Index – the spread betting division of the company and largest of its kind in the UK – in 2010. Tim was instrumental in the delivery of the IG Index iPhone application, which was recognised as being ‘indispensable’ in a recent Sunday Times survey.

Hector Sants CEO, Financial Services Authority Head of the FSA, the quasijudicial body responsible for the regulation of the financial services industry in the UK.

Gary Gensler Chairman, U.S Commodity Futures Trading Commission Head if the CFTC, an independent agency of the U.S government responsible for regulating the futures and options markets. Appointed by Barack Obama in 2009. Jurisdiction over $5tn of trades.

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FEATURE

22 Jesse Livermore Greatest trader of all time

You have to do something pretty special to posthumously be named as one of the most influential people in the world of trading, so perhaps that’s why only one man has achieved that feat. Not only is Jesse Livermore, the “Great Bear of Wall Street”, considered by most people to be the greatest natural trader of all time, but he is thought to have also written “Reminisces of a Stock Operator”, still considered the most influential book ever written about trading.

Steve Nison Author, trader Western authority and pioneer of Candlestick charting analysis in trading.

George Soros Hedge Fund Manager/Financier A major force in the world of FX trading for almost forty years, George Soros still manages one of the world’s largest hedge funds, the Quantum Fund. Despite amassing billions of dollars of profit for both himself and his investors Soros is best known for shorting the British pound to the tune of $10bn on Black Wednesday, forcing the British government to withdraw from the European Exchange Rate Mechanism and netting over a billion dollars’ worth of profit in the process.

19 Denis Sukhotin Chairman, FxPro As the Chairman and a founding shareholder of FxPro Denis Sukhotin has been instrumental in the global forex broker’s remarkable success story. Launched in Cyprus in 2006, FxPro now has over 23,000 clients in more than 149 countries with monthly trading volumes in excess of $100 billion. Denis has overseen all of the company’s marketing and promotional activities which have included sponsorship of F1 Racing teams. He is an avid football fan, perhaps one reason why FxPro has been the main shirt sponsor of Aston Villa FC and AS Monaco FC, as well as currently being the main shirt sponsor of Fulham FC and also sponsors of the Asian Football Confederation Champions League and WRC. Denis holds a Masters Degree in Finance and Economics from the Moscow Institute of Entrepreneurship and Law, and prior to launching FxPro had a highly successful career in equity sales.

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FEATURE

Andrey Vedikhin Co-founder of the Alpari Group & CEO, Alpari (UK) Ltd Andrey Vedikhin has played a leading role in the history of Alpari, beginning with originally co-founding the Alpari Group of companies in 1998. His company vision and entrepreneurial spirit has taken Alpari from concept to a rapidly growing, highly competitive and profitable company in the online Forex industry. As CEO of Alpari (UK), Vedikhin is currently responsible for new business development and strategic initiatives for the whole Alpari Group. He developed his expertise in cross-markets and Forex trading from a young age. In 1995, aged 20 and still studying, he immersed himself in the Russian financial markets. After graduating with a distinction from the Finance and Economics unit of Kazan State University, Russia in 1997, he went on to complete an additional PhD in Economics and focused solely on Forex trading. He is registered with the FSA and holds several industry qualifications. He also co-authored â&#x20AC;&#x153;Forex: an inside viewâ&#x20AC;?, with fellow Alpari Group colleague Gleb Petrov, and has authored several other technological publications.

17 Warren Buffet Investor

Matthew Cavanaugh / Photolibrary

Legendary investor Warren Buffet is perhaps the greatest living trader of all time. Despite having amassed a personal fortune of $50bn through trading on Wall Street and the acquisition of interest in companies Buffet still remains active in the markets, primarily through conglomerate holding company Berkshire Hathaway, of which he is the CEO. He was ranked as the third richest person in the world by Forbes magazine in 2011.

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Malcolm Pryor Author Author of The Financial Spread Betting Handbook, one of the widest read and most often referenced texts on how to succeed in the spread betting industry. An excellent book with a technical, systematic approach to the art of trading.

FEATURE

Ben Bernanke U.S Chairman of the Federal Reserve As the man charged with looking after the world’s biggest bank, Ben Bernanke’s influence over FX and financial markets all over the globe holds no bounds. A man not without his critics, Bernanke was at the helm before, during and after the U.S Sub-Prime mortgage market collapse and the folding of Lehman Brothers, the two biggest contributors to the financial crisis of 2008. His lack of foresight has been highlighted by some analysts as playing a crucial role in the current state of global economics. Either way, the actions of the U.S central bank still play a huge role in the day to day movements of the central markets.

14 David Jones Chief Market Strategist, IG Group

David Jones was formerly a currency strategist then a journalist with Shares magazine. He moved into the industry in 2005 before joining IG Group in 2007. David is a highly respected market commentator, regularly appearing on national TV and in the press. He is also the author of the bestselling book Spread Betting the Forex Markets.

13 Barack Obama U.S President In an industry where market volatility is the is key to profit and loss it’s not surprising that the most powerful man in the world holds a degree of influence over the markets. In fact there isn’t a decision Obama makes that doesn’t affect global finances in one way or another, so any trader looking to make money from trading would do well to try and place himself into the mind of the President of the United States. Throw into the mix the fact that a decision by the U.S Government to legalise spreading betting would dramatically alter the landscape of the industry even in the UK and it’s easy to see why Obama is regarded as being one of the most influential men in an industry it appears he wants nothing to do with.

July 2011 | THE EXCHANGE | 37

FEATURE

Jonathan Sparke The Co-founder of City Index and inventor of sports spread betting, Jonathan Sparke, may have taken a step back from the front line of the spread betting industry, but the legacy he left behind still resonates through trading platforms today.

Peter Hetherington Chief Operating Officer, IG Group Peter Hetherington was an officer in the Royal Navy before joining IG Index as a graduate trainee in 1994, and has remained with the company ever since, playing a large role in its climb to the top the spread betting industry. He has a degree in economics from Nottingham University and a Masters in Finance from London Business School. Initially working as a dealer, he was promoted to Dealing Director in 1999 then appointed as COO on the main board in 2002. As COO Peter ran IT, in 2007 this became a more operational traditional COO role and in 2011 changed again with Peter now looking after all the revenue generating business units at IG Group globally.

10 Martin Belsham CEO, City Index Martin Belsham is one of the most well-known names in City spread betting circles, and a veteran of a number of online betting firms. He joined City Index in January 2009 from Rank Group, where he was Managing Director of the interactive gaming business, and to whom he sold his Blue Square bookie for £65m in 2003. This is Belsham’s second time at the helm of City Index, having served as CEO from 1998-2002. He founded Blue Square in 1999, which was originally controlled by the private business interests of Michael Spencer. Prior to his time with Blue Square and Rank he held a number of positions within the banking and brokerage industry. On his appointment as CEO in January 2009, Belsham instigated a period of reorganisation and refocusing which returned City Index to profitability and secured the base for future growth. He has brought in a new, highly experienced and talented management team to City Index and overseen the implementation of better and more innovative risk management tools, including the Margin Close Out policy, which limits potential client losses to the amount they hold in their accounts. He has also overseen City Index’s transition to the forefront of technological innovation, highlighted by the launch of the industry’s first Apple-approved, live trading app for the iPhone.

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FEATURE

9 Lex Van Dam Hedge fund manager/trader, Pioneer of The Million Dollar Trader television programme How did you get into the trading industry? I was studying econometrics and finance in Holland and had a professor who asked me to do some work for him over the summer. I said that I would, but that if I was going to give up my summer perhaps he could arrange some work experience for me afterwards. He agreed and I did the work experience at an insurance company, I was there for a couple of months and at the end they asked me to stay. How long have you been in the industry now? Since 1992, so almost twenty years now. How would you describe what your role in the industry is? Are you more than purely a trader? My day job, and my night job for that matter, is trading. I manage a hedge fund, so although I also run the Lex Van Dam Trading Academy and do a lot of education seminars, my primary profession is pure trading. Do you have any personal highlights of your time in the industry? Making the television programme (Million

Dollar Trader, which ran on BBC 2 in 2009) was definitely a highlight. Coming up with the idea and developing it was a great process to be a part of. A lot of people have ideas but actually making it happen is something different, so to get Million Dollar Trader off the ground was really pleasing. Writing a book was also a highlight, it took a lot of discipline to finish it. My book “How to Make Money Trading” has just gone to a second print, I’ve sold over 10,000 copies to date, so it’s nice to have run out of a first edition. You’re perhaps best known for pioneering spread betting on television, do you think there’s a future for trading in mainstream visual media? I think there definitely is. Any media on spread betting should be all about education and teaching people to trade responsibly, and hopefully that is what I have done and can have a role with in the future. There’s no point in people opening a spread betting account, putting in some money and quickly losing it all, the only way to solve this problem is proper education and training. I’m carrying the baton for this way of thinking by running the Lex Van Dam Online Trading Academy, which is being positively received. We tell people how they should go about trading, that it’s not gambling, and that they should be really careful. And the platforms want people to come back and keep

trading over and over again so it’s in their interests that account holders continue to make money as well. What impact do you think the television programme you made and similar shows in the future have on the number of spread betting account holders? I think people are still quiet short term when they think about trading. I think the industry itself wants to change, but this is easier said than done, especially at the moment because the general economic situation isn’t so strong, meaning people won’t have the same quantities of available capital for trading anymore. In the long term its certainly in people’s interests to take control of their own finances instead of giving their money to someone else, which is why we’re trying to teach them how to best manage it themselves. To you think that increased television coverage could lead to an explosion in the number of people actively spread betting much like it did with poker a number of years ago? I think if the industry takes the right approach and thinks in a long term view about how to educate people properly then the industry has huge potential to grow. If people begin to see it as an alternative to poker then I think the market will be limited.

July 2011 | THE EXCHANGE | 39

FEATURE

8 Conor Foley CEO, WorldSpreads What was your professional background before you started at WorldSpreads? I was a currency trader for ten years with Paribas. I joined there straight from university in 1989 and was fortunate to get a job a trainee dealer on the FX desk. I was clearly either good at making coffee or photocopying, and managed to get a job on the corporate desk servicing client’s FX needs for about two years after that. This was pre the Euro, and in those days you had a lot more currency pairs, for example USD/DM which was the most heavily traded pair at the time. In 1995 I was made Chief Dealer on the trading desk so I had to have an overview of the FX and interest rates products from both a corporate perspective and also inter-bank perspective. When did you first become aware of spread betting? It was during those years that I spent a lot of time as a customer myself with the financial spread betting firms. In the late 90s the demand for the product in Ireland was so high that I decided to set up the first financial spread betting company in the country in 2000. We called the firm ShareSpreads, and initially just focused on the single share market. Then in 2004 we opened a UK office. We’d changed the name in 2003 from ShareSpreads to WorldSpreads, we then widened the product range from simply individual shares to the full ranges of financial markets products. How do you think WorldSpreads fits into the spread betting marketplace? The spread betting market has exploded in the last ten years, but even more so in the last five years. There are a number of reasons for that, notably the introduction of broadband and mobile phones, as well as huge volatility in the markets post 2008. We’re very well positioned as one of the UK’s mainstream Spread Betting operator as opposed to the plethora of White Labels. Owning our own trading technology gives us tremendous flexibility when it comes to the speed and depth of product and service development. Having been the first company to offer 1 point spreads and even more recently Zero Spreads we definitely believe we offer our customers exceptional value. Low cost no longer means low value. At WorldSpreads we are dedicated to providing market leading dealing spreads together with outstanding personable service. In addition we’re not just focusing on the UK market like some of our competitors, and about 50% of our business now comes from Europe. Whilst all of our trades are executed here in London we’ve been successful in exporting the product and introducing it into fourteen other European

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FEATURE

countries that we’re operating in presently. What differences have you seen in the spread betting market from when you came to the UK in 2004, is it purely volume? Volume is definitely up, probably 20% per annum, but it’s more than that though. We know that high leverage, the opportunity to take out credit and having 24 hour online access to a global product range is important to our customers. However, more than anything I believe that the dramatic reduction in dealing costs has been a major factor in the increased popularity of spread betting over the years. We would like to think that we have played a huge part in that, being the first company to introduce one point spreads two years ago, and then last year being the first firm to introduce zero spreads on a range of ten of the most popular markets in the industry. Effectively you now have a product where retail clients can trade the worlds markets 24 hours a day, using leverage, tax free, commission free and spread free. If there’s a better way to trade the financial markets I am certainly not aware of it. How has the “zero spreads” concept been received by the industry? We’ve been pleasantly surprised by the response rates. There was a certain amount of market scepticism last year when we did launch the zero spreads product offering, in that it would be a temporary thing and that we wouldn’t be able to sustain performance on that basis. It’s correct to say that it’s a compelling proposition, but that isn’t to say the product is a loss leader. The product is available between the hours of 8 am and 4.30 pm, on ten markets and available to our Platinum clients who have at least £5,000 in their account. Because of all three variables ancillary revenues are inevitably generated. That was our philosophy and that’s what we’ve seen, people coming to us and then trading a much wider range of markets. Have you got any personal highlights of your career since you started WorldSpreads? Floating of the company in 2007 was definitely a highlight. The success of entry into a number of markets, particularly Europe and Israel, where we’re due to open an office shortly, has

also provided a number of other highlights. Apart from that, the attraction and retention of some excellent key staff has been exceptionally pleasing. We’ve got a great team here and the atmosphere in the office is fantastic. What do you think you’d be doing now if you hadn’t gotten into trading? I would almost certainly still be working in the bank. Having spent four years doing a Masters degree in economics I can’t quite describe the look on my mother’s face when I told her I was leaving a good job at the bank to start up a spread betting company. The irony of that of course is the collapse in the banking sector, one of the banks I worked for in Ireland in particular has suffered a huge fall in grace. I immensely enjoy working in the spread betting market but I can see a time in the future where I will certainly be looking into other areas and sectors, but what they’ll be right now I don’t know. Finally what advice would you give someone wanting to follow in your footsteps? For anybody considering setting up their own business, the first thing I would say is that everything takes twice as long and costs twice as much as you’d expect. The second thing is that that when you strip business back to its basics, it’s still all about people doing business with other people with whom they have something in common or they like. That’s part of the reason I’m such a fan of networks and organisations that facilitate better communications between the principle players in the industry. This philosophy is brilliantly illustrated in a book called ‘Never Eat Alone’ by Keith Ferrazzi. The more people you know the more opportunities will inevitably come your way, and I would emphasise getting out and meeting as many people as possible. What about trading? Spend a lot of time getting educated, and speak to people all the time to get as much information as you can. It can be a lonely and difficult task trying to beat the market by yourself at home, trying to pick tops and bottoms, technical analysis has gone way beyond that. I’m a big fan of crowd mentality.

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FEATURE

industry with a small number of major market players, and we’re currently in a period of a lot of regulatory changes. Therefore I think that the SBA is an important body that is a gives the firms an opportunity to get together and air their views on where the regulations are going, and also common issues such as how we should be protecting customers and making sure that the industry retains its good reputation.

Bridget Messer Company Secretary IG Group, Secretary of the Spread Betting Association What were you doing before you started working in the spread betting industry? My professional background is private practice law, I practiced in Australia specialising in financial services regulation and corporate advisory. When I moved to London I initially worked for Deutsche Bank, and then spread betting came across my radar. I didn’t know a lot about it at the time, but made the move to IG six years ago and I can’t imagine not being in the industry now. What is your current position at IG? I am the Global Head of Legal and Compliance, and also the company secretary of IG Group. What does that involve on a day to day basis? IG Group has got thirteen offices around the globe, it’s my responsibility to ensure that those offices comply with the rules and regulations that apply to them and also to make sure that IG provides its clients with a service that’s fair in compliance with the regulations. The legal aspects of my role primarily involves protecting IGs legal rights and making sure we fulfil our legal obligations when dealing with anybody other than IG, including clients, employees and suppliers. What is the role of the Spread Betting Association in the industry? The Spread Betting Association has been around for more than ten years, it’s an association of all the major spread betting providers in the UK. We have a lot of common interests as an

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How do you split your time between the work you do at IG and the SBA? The majority of my time is spent working for IG, but there’s inevitably an amount of flexibility in how involved I am with the SBA. Depending on the issues affecting the industry at the time e.g. new regulation proposals, I might be liaising with other firms more often than I would normally. How involved are you with regulatory bodies? Do they ever consult you? Yes, we do represent the industry and consult with regulatory bodies as part of the fair regulatory process. The regulatory bodies give affected parties the chance to comment on proposals, so very often if the FSA is bringing in proposals they will put out an opportunity for the public to comment. IG and the SBA will very often take up the invitation to speak up because we think it’s very important to make your views known and make a commitment to the regulators throughout the regulation making process. Also if it’s a specific issue

FEATURE

directly relating to spread betting the FSA might approach firms or the SBA directly to get our view on it. Is every spread betting platform represented by the SBA? There are twelve members, all of which are major spread betting platforms, so we’re certainly a very good representation of the industry. There have been a few new players come into the market recently that might not be represented currently, but the CBA is an open group. It’s not a closed membership, if companies approach us we’re happy to have new members. Do you think the dynamic nature of the industry is set to continue, and what will the SBA’s role be in that development? Yes I do think that the pace of regulatory change we’re seeing at the moment will continue going forward. I think that it’s a real regulatory trend at the moment to be active in regulation, especially after events that have happened over the last few years. When you are a part of a highly regulated industry like ours and you are reliant on those regulations no business can afford to ignore the changes or not make their implementation a priority. Here at IG and at the SBA regulation changes are made a priority; it’s important we keep up to date and also engaged with regulators and other interested bodies to ensure the regulations are fit for purpose. Have you got any personal highlights of your time in the industry? I think IG’s achieved so much as a company in the last few years, and that’s something all its employees have been responsible for. I’m quite proud of our success and the progress we’ve achieved over the period I’ve been at the company.

5 Tim Howkins CEO, IG Group Tim Howkins joined IG Group as Finance Director in 1999, and became Chief Executive in 2006. Under his leadership the Group is now a FTSE 250 member and currently operates in 14 countries worldwide. During Tim’s time as CEO, group revenue has grown from £89m to £320m. Tim is on the Board and Executive Committee of the Futures and Options Association, an industry association for the UK and European derivatives industry. He has a first in mathematics and computer science, is a chartered accountant and a member of the chartered institute of taxation.

Peter Cruddas CEO, CMC In 1989 Peter Cruddas established Currency Management Consultants Ltd with nothing more than £10,000 of capital and a wealth of experience of foreign exchange trading. Now known as CMC Markets Plc, the company today has an estimated worth of £1.25 billion. Goldman Sachs paid £140m for a 10% stake in in CMC in 2007. Profits rose sharply to £57.2m in 200708 on soaring turnover of £181.4m. Past salaries, dividends and a £30m property portfolio once valued Cruddas at over £1bn. Stock market turmoil last October led to a “record day for client activity” at CMC Markets, hitting the company hard and reducing Cruddas´ personal stake from £1.12 billion to £850m. As well as establishing an empire in the world of spread betting, Cruddas is also known for his charitable work. Having built an extremely successful business, three years ago he established The Peter Cruddas Foundation with the primary objective of helping disadvantaged and disengaged youth. To date, in excess of £11 million the foundation has granted or pledged to more than 50 charities - it is Cruddas’ hope that total donations will exceed £100 million”. Cruddas is also the current treasurer of the Tory party.

July 2011 | THE EXCHANGE | 43

FEATURE

Roger Hambury Manager Director of EMEA, City Index Going right back to start, how did you find yourself in the industry? My background was always in equities. My father was a market maker on the floor of the London Stock Exchange, and when they shut the floor he started up a stock broking firm. When I left school it was natural for me to join him. I turned up for work on the first day and being a cheeky young lad, I went straight to the trading floor and tried to fit myself in with the other brokers. It wasn’t long before I got found out and sent down to the post room! I spent the next three years there learning the ropes. I worked in every area of the business, apart from trading, which is all I really wanted to do. It was a bit of a struggle trying to prove that I belonged on the floor, but it was a great education on how the system really worked. How long did you stay there? After passing my regulatory exams, I traded for my father for around a year. I was then offered a fantastic opportunity to go to New York and work for the world famous investor, Michael Steinhardt. He ran a hedge fund and was basically George Soros’ opposite number in the markets; Soros had the long fund and Steinhardt had the short. Steinhardt’s returns were about 30% annually over more than 20 years, he was a phenomenal trader. The job was meant to last for three months, but I ended up working there for a year and was an amazing learning experience. At the end of the 12 months, I moved to South Africa, where I worked on the floor of the JSE, mostly trading in mining stocks. That must have been an exciting time. It was my first experience of a live pit trading floor, which is a bit of a dying breed these days, so it was very exciting. During this time, I was also working as an analyst, so I used to write reports, which meant that I could go down the mines. I went down about two kilometres into a gold mine once, which was an interesting experience. What happened when you came back to the UK? When I came back I got into derivatives. I started working for a small company, trading futures, and I was made Head of Trading there after three years. It was a brilliant education which helped me spot a niche in the market that I thought was worth exploring. At the time there wasn’t

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really the ability to trade offshore - if you had people, who wanted to invest, but their funds were located elsewhere, they couldn’t get into the derivatives market. A partner and I set up a company in Nassau in the Bahamas to allow people to do just that. We were the first company to get regulated by the Central Bank, which meant we had the equivalent of FSA regulations. The business did extremely well and it didn’t take long for other firms to take notice. We ended up selling half of the business to Mayfair based firm Berkeley Futures. What made you come back to London? It was the right time professionally and for personal reasons. I spent much of my career life in other countries and felt it was the right time to come back home and allow my professional life to settle down. It was then that got approached by IG Group. I hadn’t really heard of them before then, but I spoke to some contacts about CFDs and quickly found that they were the new financial products coming into fashion at the time. Because of my professional background, the concept of leveraged trading of equities, and avoiding stamp duty, interested me. I went for an interview at IG to set up a company called IG Markets (separate to IG Index) which was going to be their first venture into CFDs. I was interviewed by Stuart Wheeler who had a very unusual interviewing technique, including having to play him at poker. I lost the poker, but wound up with the job – not a bad result. So I set up IG Markets, which was focused on CFDs and FX, and this coincided with the first real shoot of growth in the CFD markets. So when did you start working at City Index? I started at City Index seven years ago. City Index had a reasonable index business but its equities arm was non-existent. The management wanted to address this, so I came over and built City Index’s CFD business, which became the world’s largest. How did you achieve that? One of the most important things we did was to pioneer the White Label business, which meant we offered the banks the ability to enter the CFD market. We had approached them five years before and they had no interest in it at all. They didn’t see it as something their customers would be interested in, but as time passed and the CFD business grew and grew, the banks realised that their customers were either going to trade CFDs with them or they were going to come to us. So we white labelled

our systems to give the banks the ability to give the product to the customer directly, which really saw the CFD business take off. We quickly acquired several large partner deals, including that of longstanding partner Barclays Stockbrokers. To this day, the partnerships business remains a lucrative part of the City Index business. What’s your role at City Index today? I’m Managing Director of EMEA operations for City Index Group and my principal role is to grow the business in these regions on all fronts, including product development, sales and marketing. For me, the best way to grow a business in any region is by constantly providing the best products and service possible in the most cost effective way for clients - and this is what we strive to do. Two sides that we see as being of vital importance to the customer are education and technology. We don’t want to give the customer the best tools in the industry if they don’t know what to do with them, because they’re going to fail. If you give someone a Bugatti Veyron and they don’t know how to drive it, they’re likely to crash, so we have a huge educational structure, offered through the website, including webinars and a ‘learn-to-trade’ programme on how to use spread bets and CFDs safely. And then we give customers innovative technological tools such as mobile and online trading platforms, so that they can undertake as much research as they want and place trades quickly and efficiently, to make the most of opportunities that they see in the market. Whether it’s via an iPhone, Android or iPad, the customer has to have the ability to trade whenever they want, wherever they are. How comparable now is the industry to what is what like when you started? In terms of customer base it’s obviously a lot more mature but certainly our typical client base has diversified immensely and this is in no small part down to the technological innovation of the internet, which has made trading derivatives products like spread bets, CFDs and forex much more widely accessible to the public. Trading no longer belongs to an elite club. The advent of mobile trading has also really changed the industry over the last few years. We launched the industry’s first live mobile trading application for iPhone devices back in 2009 and followed this up with the first launch on Android mobiles last year. Over this period the percentage of trades executed on our mobile platforms has grown immensely from 2% to nearly 25%, which is a huge leap.

FEATURE

The last few years have also seen a big price war on spreads. If you were in the industry eight years ago and you were really competitive your spread on the FTSE was probably six points wide, and maybe ten points overnight. Last year, City Index cut spreads to just one point on our FTSE, DOW, DAX and CAC daily markets, so that’s another huge difference. How involved are City in the development of the technology? Do you have to wait for technology to advance before you continue innovating? We dedicate a huge amount of our resources to technology development and specifically innovation. It was this dedication that allowed us to first develop our live trading applications for iPhone and Android mobiles. We were ahead of everybody else with mobile development and I honestly think that some of our competitors didn’t fully grasp the potential impact of mobile trading as much as we did. Maybe they thought it was a bit of a fad, or that people would use it but only as an information tool, just to find out where the market was and not to actually trade positions. Now other platforms’ customers are demanding iPhone capabilities, asking, “When are you going to come out with an iPhone app, because City Index has got one?” So they’ve had to scramble to catch up with us. Finally, as someone who has been so successful in the industry, what’s the best piece of advice for somebody looking to follow in your footsteps? I think one word that sums up the approach you have to take for both trading in general and trying to break into the industry is discipline. A lot of people want to get into the industry because they read the headlines and think it’s all money, money, money, and that this job is easy. If you think you can get a job with one of the spread betting houses and just turn up for work and be on seven figures a year with a huge bonus you’re destined for failure. It’s simply not like that, this industry is incredibly tough. That being said, I think that if you’re passionate about the industry and what we are trying to do, then you have a great chance of being successful. Do you think your passion for it will ever die out? No. I think if my passion for it died out, I’d leave the industry, and it hasn’t yet. In fact I’m still as passionate as I ever was. It’s a very exciting industry to be involved in and I feel very privileged to be a part of it.

July 2011 | THE EXCHANGE | 45

FEATURE

3 Meryvn King Governor, the Bank of England As the man charged with keeping the UK central bank on the straight and narrow, there aren’t that many more influential men in the financial world, let alone the United Kingdom, than the Governor of the Bank of England, Mervyn King. As chairman of the monetary policy committee King presides over the men who determine UK interest rates, and consequently the knock-on effects a change of rates have on the UK finances in particular the foreign exchange and index markets. Under King’s guidance interest rates have remained at their lowest under the independent monetary policy committee since dropping to 0.5% in March 2009, and with analysts now predicting that poor economic data will result in this remaining stationary until 2013, a weak British pound looks set shape UK economics for months, if not years, to come.

Michael Spencer CEO, ICAP Coming in just one place short of top spot is ICAP CEO and City Index owner Michael Spencer. And it’s little wonder that he features so prominently on in the list of the most influential people in trading, in his time in the city Spencer has seen and done it all, from trading on the floor all the way through to running the biggest interdealer broker company in the world. His journey to the top of the spread betting tree began in 1986, when he founded Intercapital Group. Through a number of mergers Intercapital became ICAP, the FTSE 100 firm of which he is still the CEO. Through the wealth generated by the success of ICAP he acquired City Index, and has financially overseen the company establish itself as one of the two biggest spread betting firms in the UK. It is estimated that Spencer’s personal wealth comfortably put him in the billionaire bracket, the vast majority of which has been earned through the trading industry. But as influential as Michael Spencer has been to the explosion of spread betting in the past ten years, there’s still one man who’s managed to beat him to top spot on our list...

July 2011 | THE EXCHANGE | 47

FEATURE

Jason Alden / Rex Features

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FEATURE

Stuart Wheeler Ex CEO, IG Group Unsurprisingly the man who still sits at the summit of the world of spread betting is the man who started it all, Stuart Wheeler. There might be a few people trying to work out just how Wheeler manages to top the pile of professionals in an industry he is not part of. Well that’s an easy question to answer. It was Wheeler who came first, and the pile that came after. In 1974 Wheeler, an unemployed stock broker at the time, was considering the various different ways of which investors could profit from fluctuations in the price of gold, when an idea struck him that would alter the course of the financial markets forever. Shouldn’t people be able to profit from being able to accurately predict whether the cost of gold will rise or fall without actually having to buy or

sell physical quantities of the precious metal, which could only be done at a high premium? Couldn’t a system be devised by which an investor could wager whether the price will go up or down instead? And just like that, spread betting was born. Wheeler called his company the Investors Gold Index. The Bank of England complained about the name, so he changed it to IG Index. Shortly afterwards the new company diversified from only offering prices on gold to foreign exchange and commodities as well. IG Index was well on its way to becoming the market leader in the industry, a position it has held for the past twenty seven ears.. A fistful of competitors have entered the market since, all seeking to emulate Wheeler’s accomplishments, but to date none have managed to quite match the trail-blazer’s achievements. With 60% of the market share IG remains the biggest fish in the spread betting pond, and it’s Wheeler it has to thank

for their success. From the early days of spread betting, through to the introduction of sports spread betting and the flotation of the company in 2000 there’s nothing in the world of spread betting that doesn’t have Wheeler’s stamp all over it. He’s seen, and done it all. He is it all. Having sold the last of his IG shares Wheeler has invested the majority of his time (and money) into the renovation of a grade 1 listed property in Kent and the pursuit of his postprofessional passion, politics. He donated £5m to the conservative party for 2001 election campaign, but was expelled from the party in 2009 after donating £100,000 to UKIP in protest David Cameron’s stance on the EU. He was appointed UKIP treasurer of the party in 2011. But it’s his contribution to spread betting that sees him top The Exchange’s Top 50 list. And it’s a good job too. After all, without Stuart Wheeler there wouldn’t be a Top 50 list at all.

July 2011 | THE EXCHANGE | 49

THE LONG

LONG THE

IN THE LONG SIMON SMITH GREG MICHALOWSKI ATIF LATIF ALASTAIR MCCAIG KEN FISHER

DECLAN FALLON PETER WEBB SVETOSLAV GEORGIEV STUART RICE

Greek riots threatening to tear Europe apart A crisis that many thought couldn’t possibly get worse escalated even further this month, as rioters took to the streets in Greece in protest against EU austerity measures designed to bring the country back from the brink of defaulting on its national debt. Ten of thousands of protesters lined the streets of Athens amid a general strike which paralysed the country’s economy, and as the demonstration continued the crowds became violent and clashed with police. Greek Prime Minister George Papandreou offered his resignation in

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response, saying that if he were the problem then he would not stand in the way of the implementation of a suitable austerity package if one could be agreed. MPs voted 155 to 143 along party lines to back Papandreou, who now faces a critical vote next week on the massive austerity package which will determine the fate of the Greek economy, and perhaps the fate of the entire Eurozone. But don’t take our word for it…

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2011

THE LONG | ANALYSIS

ECB Driving the European Train Crash By Simon Smith - Chief Economist, FxPro There’s a great paradox opening up in Europe right now. The markets, and also voters, are saying that the sovereign debt crisis is as bad as it has ever been. Leaders who presided over bail-outs have been ousted in Ireland and Portugal (Greek PM Papandreou is the only exception), whilst the rate at which peripheral nations borrow in the market are near to record highs once again. Yet the European Central Bank is saying that, despite all of this, interest rates need to rise further. Can it really be right that they were the last to start cutting interest rates at the start of the crisis (indeed, they raised them!) and the first to start putting them up? History will be the ultimate judge, but something feels very wrong about the current strategy, especially as the recent data has been indicating a synchronized global slowdown in economic activity. Go back to very start of the credit crisis, when Libor markets started to seize up in the summer of 2007, and the ECB was quick to react to the liquidity situation. Whilst the Bank of England worried about moral hazard (creating incentives for future reckless behavior), the ECB came in, changing its refinancing operations to offer whatever funds institutions wanted in return for eligible collateral. Whilst they may have taken a lead on the liquidity situation, they were lagging far behind on the economic one. Their July 2008 interest rate increase came just two months before the collapse of

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Lehman and, whilst they were obviously not in a position to have pin-pointed this ahead of time, the move represented their belief that the eurozone was somehow different and largely immune to the economic implications of what was then largely seen as America’s problem. I was in Washington at the time, stood outside the IMF when someone told me, and I remember my sense of disbelief. The sense I got from meetings with officials at the time (including the Fed) was very strong – don’t assume the worst is over. How true that proved to be. Fast forward to today and after the ECB rate increase in April, the sense that the worst may not be over is much greater than it was back in 2008. This applies most strongly to the sovereign crisis, but also to the post-crisis economies in Europe and the US (there’s no suggestion we are going to have a global slump the scale of 2009 again). In the eurozone as a whole, only Germany has reached its precrisis level of output. The same holds true for employment. This comes against the backdrop of what is looking like a synchronised slowdown in global output. Some believe this is only temporary, but I believe what we are seeing is something more than that. We’ve entered the tail-end of a period whereby growth has been supported by a number of temporary factors, not least fiscal stimulus packages (principally in the US, previously in the UK), together with inventory re-stocking. Now, many hope, economies can

THE LONG | ANALYSIS

move to a greater reliance on investment and net exports, but you don’t have to be a rocket scientist to work out that the latter is a zero sum game in which everyone cannot benefit simultaneously. These economic risks are also inter-linked with the risks of the fiscal situation. The ECB, together with many politicians, is doing everything it can to avoid a default, initially in Greece and possibly elsewhere. The key reason is contagion. It holds substantial amounts of Greek debt, as do Greek banks which, at the same time, are placing more of their Greek debt as collateral with the ECB to offset their falling retail and commercial deposits. So far though, the solutions have looked weak at best. Firstly there was the talk of ‘reprofiling’ of debt. This is akin to someone who was due to pay you back in two months ringing you up and saying they will pay you back in six.

Understandably, you would feel hard done by and in any other sphere, this would be classed as a default. Then we’ve had the ‘roll-over’ discussion, which proved even more bizarre and ill-thought out. This boiled down to asking investors to renew their loans when they matured, but with no added inventive for doing so from the borrower (in this case Greece, either directly or EU-backed), otherwise this would constitute coercion and by design, default. Naturally, especially in investment, if someone asks you to do something to their benefit, your natural (and logical) reaction is to ask “So what’s in it for me?” The common feature of both ideas is that the market knew that neither would fly

“Greek banks are placing more of their debt as collateral with the ECB to offset their falling retail and commercial deposits”

from the off (as did the ratings agencies), but nevertheless they were presented as viable options by the European authorities. In the meantime the ticking time-bomb of Greek debt which the country cannot afford to repay remains, and will pose considerable costs wherever it lands. At present, this will either be on bondholders (and by design, the ECB and Greek banks), or on tax-payers. There is simply no way that Greece will be able to grow its way out. Until the issue of where this burden will fall is resolved, the rate increases are a risk

strategy for the ECB, not least given the impact of rising Libor rates on the many variable mortgage rates in the periphery (e.g. near to 90% in Spain). The ECB is taking several concurrent gambles, notably that the current slowdown in growth (in the eurozone and beyond) is temporary; that somehow the issue of debt sustainability in the periphery will disappear, and that sustained fiscal tightening will ultimately prove inflationary. To me, it doesn’t stack up.

July 2011 | THE EXCHANGE | 53

THE LONG | ANALYSIS

Euro zone and debt crises: challenges and opportunities By Svetoslav Georgiev, Hantec Markets

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THE LONG | ANALYSIS

“The benefits of the Eurozone are numerous, but right now we have to face its imperfections”

Undoubtedly the European debt crises have provoked fears in investors and concerns in economists. Some inherent imperfections of the European Monetary Union (EMU) became apparent. Countries that are a part of the Euro zone, and whose debt is therefore issued in a currency that they cannot manipulate, are facing such strong market pressures that they may have to default on their debt payments. A worst-case scenario may in fact result in a Euro zone without countries like Greece, Ireland, Portugal, and even Spain or Italy. However this isn’t a guarantee, we might also see a strengthened monetary union, where countries issue Euro bonds and help each other. Here, I will attempt to explore some challenges posed by the unfolding debt crises in Europe and opportunities to develop the currency union. Monetary union and sovereign debt

The benefits of the Eurozone are numerous, but right now we have to face its imperfections. The most clear-cut is that member countries surrendered the right to independent monetary policy by transferring interest rate and currency manipulation decisions to the European Central Bank. Part of the integration process, this step makes monetary union member countries similar to developing countries with respect to their foreign debt. The crucial similarity is that the debt is issued in a currency out of the control of the issuing country. When investors become concerned about holding, for example Greek bonds, they sell them and invest the received Euro in bonds of a lower risk country. This reduces the money supply in Greece and deepens liquidity problems. Therefore, as in the case of Argentina a decade ago, markets can push a debtor country to default. Own currency and sovereign debt

In contrast, a country that issues its sovereign debt in its own currency retains a number of instruments that can help avoid a default on its foreign debt. If concerns arise about the solvency of such a country bond markets will reflect the risk in higher interest rates, and bond holders will start selling. The currency received in return will weigh on the supply side of the money market, pushing the independent currency exchange rate down. Thus, through a self–regulating market mechanism a country issuing debt

July 2011 | THE EXCHANGE | 55

THE LONG | ANALYSIS

in its own currency will pay debt holders with inflated currency. For example, the UK government debt stood at 76% of GDP in 2010 and Spain’s was 63%, however Spain had to pay two percentage points more to borrow in international markets. At the same time Spain’s inflation, for the same period, was under 2%, while the UK’s stood at over 3%. Spain is part of the Euro zone and the UK has its own currency. Investors understand that Spain faces the rigidity of financial markets without the cushion of its own currency and price this in as a risk premium. Foreign and domestic debt

The composition of government debt should not be ignored. A country with mostly domestic government debt has the flexibility to control its debt level through taxation, and Eurozone countries have their own taxation powers. Differently, a country with mostly foreign debt holders has no mechanism of controlling its debt level and is exposed to a probability of default similar to a developing country. Research showed (D. Gros, May 2011) that in 73% of cases the spreads on sovereign debt are inversely related to the current account balance, emphasizing the importance of the debt composition. The concerns of the markets about Portuguese debt are mostly fuelled by the high level of foreign debt. While the overall government debt level is lower than some other Euro area member states (e.g. France), whose borrowing cost is closer to the risk free benchmark of German bonds, Portugal has a high foreign debt and thus a higher risk of default. Forced to help each other

By joining the EMU member countries surrender much of their monetary policy independence. Clearly, this is an important integration step for European economies, with benefits spanning from lower transaction costs to increased business mobility. However, vast regional economic differences are bound to create obstacles on the way. They materialize as debt crises, causing markets to doubt the willingness of member counties to persevere with the common currency. Eventually, there will have to be an effective mechanism for internalising the effects of these differences. The European Financial Stability Facility (EFSF) was established as a lender of last resort in response to this concern. However, it will take more to convince investors that member countries want a long-term Euro. One possible step is the issue of Euro bonds

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with member countries liable together, thus minimizing the likelihood of debt crises caused by lack of control over the currency the sovereign debt is issued in. Adverse selection and moral hazard problem

Regional economic differences within a “core-periphery” Eurozone and widely ranging cost of borrowing will fuel adverse selection and moral hazard problems. The countries most likely to default will be the first candidates to participate in Euro bond issues. Countries carrying high risk premiums will have an incentive to borrow excessively together with low risk bond issuers, such as Germany. Finding an acceptable solution will be a major challenge to overcome. Perhaps high risk countries can pay a fee to participate in the bond issue. Reaching a solution may not be only an economic problem but one that has to involve governments at a political level, if investors are to be convinced of the determination of the Euro zone counties to stay together and to deepen the economic integration process further. Euro-a reserve currency

A successful Euro bond scenario may be an opportunity for the Euro zone countries to attract international investors on a large scale, thus increasing the weight of the Euro in the portfolios of private and institutional investors. This would make the Euro a real alternative reserve currency with a sizable

market, giving investors a reason to hold bonds issued in Euros as core investments, not only as a diversification away from the US dollar. If this is realised, the Euro zone countries will enjoy a lower borrowing cost attributed to the perceived stability of the reserve currency (Gourinchas & Rey, 2007). The appeal of this long term goal can serve as a powerful motivation to look for a solution to the debt crises in further economic integration, not in downsizing the Euro zone. Euro zone member countries are effectively in the situation of developing economies in international bond markets, deprived of the ability to manipulate the currency in which their debt is issued. Whether the outcome of the government debt crises in Greece, Portugal, and other EMU countries will be similar to the default of Argentina a decade ago depends on the will of member states to develop mechanisms for internalizing the effects of regional economic differences, specifically the risk premiums on government bonds. The moral hazard problem, creating an incentive for high risk countries to pool together with core, low risk countries will be a main obstacle to overcome. If the member countries show that they have the will to persevere and to develop viable Euro bond issues, there will be appealing benefits to all member states. Most importantly, the opportunity to issue debt in a reserve currency, at low cost level, will increase competitiveness and boost economic growth in member states.

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Real thinking - Real trading

THE LONG| ANALYSIS

58 | THE EXCHANGE | July 2011

THE LONG | ANALYSIS

Should we be worried about the commodity weighting of the FTSE or taking advantage? The FTSE is saturated with commodity companies so it’s time to figure out how to take advantage, says Alastair McCaig of WorldSpreads Over the last 24 months the FTSE 100 has become increasingly weighted with commodity stocks, and the recent addition of Glencore International to the already existing pool of Rio Tinto, Xstrata, BHP Billiton, Anglo American, Antofagasta, Kazakhmys, Eurasian Natural & Vedanta Resources has seen the importance of the Mining sector to the FTSE continue to grow. When we then add in the oil & gas commodity stocks, including BP & Shell, we see the weighting grow to 33.48% of the FTSE 100 index. Even with the market capitalisation of BP having been greatly reduced by the disaster in the Gulf of Mexico, over a third of the index will be directly affected by the movements in the underlying commodity prices. To put this into perspective you only have to compare this statistic with the Bloomberg 500 European Index (which includes FTSE 100 stocks), where the Mining and oil/gas commodities sectors have a weighting of 19.41%. This highlights how much more slanted to this sector the FTSE 100 is to the rest of our European index counterparties. If we then look over to the US the S&P 500 we can see that the same sector again only has a weighting of 13.69%, a further reduction. Why is the FTSE so heavily focused in this sector? Well, part of the reason is because stocks are promoted and relegated from the FTSE 100 on the back of their market capitalization, which by definition means that those sectors that are currently more successful will be more heavily weighted in an index that rewards companies that are doing well. Whenever the current enthusiasm for the mining sector stocks cools we will see some of these mining stocks relegated and replaced by stocks that are probably from whatever the new most popular sector in the market is. Of course the global

“sectors that are more successful will be heavily weighted in an index that rewards companies that are doing well” markets demand for commodities has been developing for years, mostly driven by massive Chinese consumption as its economy continues to grow at over 9% per year, and China’s government spends £190 Billion on over 150 transport, energy, water & telecommunications infrastructure projects. But why has the UK market become the favourite home for some of these companies? Firstly, London is based in between the two major economic time zones of America and Asia, and secondly the financially rewarding tax and regulatory structure that has been in place for the last decade, meaning London has been able to attract many of the largest firms from both of these time zones. Far from being worried about this situation, this is in fact one of the best trading environments for the spread betting community to take advantage of because of the number of indicators of volatility available. Obviously watching the underlying commodity prices fluctuate in the market can assist in the trader’s ability to gauge where the markets will move. Many of the FTSE 100 companies are based outside of the UK and their income is derived not in Sterling but in US$ Dollars and so being aware of the strength of the Dollar index is also important as all of these

companies will need to convert any profits into £ Sterling for their annual figures. Arguably one of the most useful tools that traders can take advantage of is the ability to view the Australian market and how it has performed overnight before the FTSE 100 opens. The ASX 200 has a 32.88% weighting in the Mining, Oil & Gas sector, this is roughly the same exposure as the FTSE 100, and as such their index is susceptible to many of the same external factors that affect the performance of our market. As we can see on the chart below over the last 18 months the similarities between the two Index’s highlight how closely these markets have traded. Several companies have a dual quotes on both the FTSE 100 and the ASX 200, such as BHP Billiton and Rio Tinto, which offers traders not just a snap shot of how the index will be affected but also a direct indication of how several companies will trade. The advantage of the time zones mean that European indexes are guided by how the Asian markets have behaved overnight, then in the morning the European traders will guide the market up until 1pm when the European markets then turn their focus on the early pre market news flow coming out of the US. Rather than be worried that too many of our eggs are in one basket, this appears to offer the spread betting client an opportunity to trade products that have already shown a pattern overnight. This leads to an indication prior to the European open, giving guidance for the day ahead rather than starting the morning from cold, and I for one think this is a situation that we should enjoy while we can. It will not always be the case that Europe is the hub of sector events and we should enjoy this opportunity while it lasts, because as we know all good things come to an end eventually.

July 2011 | THE EXCHANGE | 59

THE LONG | ANALYSIS

60 | THE EXCHANGE | July 2011

THE LONG | ANALYSIS

Trading DMA (Direct Market Access) CFDs has become the investors’ tool of choice when trading the markets short term. Historically DMA has been the preference of professional traders as it allows for trading the markets with complete transparency and full control of entry and exit levels, due to trading directly onto the stock exchange order book. By Atif Latif, Guardian Stockbrokers

DMA trading allows investors to view and trade directly onto the Level 2 order book, across exchanges such as; LSE, Chi-X, BATS & Turquoise. Trades are executed by hitting the bid/lifting the offer, and by queuing at different prices where perhaps gaps appear, or at defined support/resistance levels. The advantage with DMA trading is that the investor can be sure that the prices quoted are real time and accurate and that it can therefore avoid spreads widening in fast markets, which on occasions can create spikes that trigger stops when the underlying price may not have reached that level. Some CFD providers quote their own prices for various investments, they have no obligation to follow the quoted prices offered by the exchanges which therefore creates uncertainty in price movements. This uncertainty is eliminated by DMA CFD trading as this role is taken by you being a price maker. DMA CFD providers do not look to profit from your losses so there is no conflict of interest, and more importantly they not trading directly against you. Level 2 data is the amalgamation of all orders on both the buy and sell side. Shown in price order, this enables institutions/investors to see where to place orders into the market directly, and retail investors are now able to view the same data. This results in total transparency as investors are able to see small price movements in real time, allowing them to identify technical support and resistance levels. Retail investors effectively become a price maker in the market as they are able to decide where to place buy and sell orders, whereas historically they have been a price taker. More importantly all price quotes and liquidity are directly identical to the underlying market. This provides transparency which is of paramount importance to investors trading short term, as a better entry/exit level can add value to the profitability of trades. Investors are able to see the order book for companies listed on the FTSE all the way down to AIM companies, allowing them the

“The advantages of DMA trading are a combination of being able to achieve best prices for, no additional spread on prices, and the ability to be in control of where to buy and selL” added benefit of seeing where the volume is being traded at specific prices in the market. The advantages of DMA trading are a combination of being able to achieve best prices for investors, no additional spread on prices, and the ability to be in full control of where to buy and sell. It is also useful to note than investors can trade the aforementioned real market price, which gives better and faster execution and more importantly allows investors to work multiple orders such as GTC, GFD, Fill or Kill, Execute and Eliminate, Iceberg, At the Open, At the Close & Intraday Auction. For large sized transactions Iceberg orders are a useful addition to this list as they allow the investor to place large orders into the market by only showing a small part of their intended overall size, and this is particularly helpful when trading stocks with a lower level of liquidity. Similarly, in the opening and closing auctions larger sized trades have a greater chance of being filled than during normal trading times. Once an order is placed investors are able to see their position working in the market. In addition to this, some platforms offer the function to trade across a number of exchanges as mentioned above, this offers a larger liquidity pool and also give opportunities to arbitrage across exchanges. In simple terms this means that an investor may

spot that one exchange is offering a different/ better price than another, allowing them to buy at the better price on one exchange and sell at a higher price on the other. Given all the positives for DMA trading outlined above, as with any product, there are some disadvantages worthy of note. If the investor is placing their own trades onto their trading platform the risk of creating the wrong order type or direction can be high, particularly if experience levels are low. Fat finger trades can also be a risk where orders are placed for the wrong size, exposing the investor to a larger trade than they had intended. There are still a large number of investors that prefer to call their broker to place orders for them, this allows the investor the peace of mind that the broker is then responsible for executing the trade and the ability to gauge market colour and information that may not be readily available. This method tends, however, to dramatically increase the costs of trading. As with any stock market investment there is a risk, and the risk is amplified when trading products like CFDs because of the leverage aspect of the trade. This allows the investor to use a small deposit to buy a position of a much greater value, but still leaves the investor exposed to the entire value of the trade in a long position and potentially unlimited in a short. Also some investors may overtrade, due to the ease of using a trading platform, this may result in losses and or unnecessary over exposure. It is therefore important that all investors looking to trade CFDs have a good understanding of the mechanics of trading on leverage and have robust risk managements strategies in place to minimise the risks involved. Normally this will be by way of education about CFDs and developing a trading strategy, to suit your risk profile, this can be aided by the use of demo accounts and or if you are seeking advice, by using a broker with the relevant experience and qualifications.

July 2011 | THE EXCHANGE | 61

THE LONG | KEN FISHER

KEN

FISHER

Muni Fears Morphing In his latest column from the other side of the Atlantic Ken Fisher sets the municipal debt scaremongers straight, even though he knows it won’t make a difference Investing fears never go away—they only ever morph. When apprehension turns out not to be as bad as had been feared, investors never say, “Phew, clear sailing ahead.” Behaviorally, human disposition is not to adopt that approach. Instead we’re pre-programmed to fear risk much more than we appreciate the absence of risk. Currently in the market a major investor fear continues to be widespread, namely that US municipal bond defaults triggering a fresh debt crisis, contagion, and a new global recession. In my February column for the Exchange I said the fear was hugely overblown. Now, mid-year, that opinion appears to be justified. In 2010 the story dominating the markets was also debt based. Back then it was the initial PIIGS fear spreading via “contagion” throughout Europe and dragging the rest of the world into a much dreaded (but in truth almost never seen) double dip recession. Make no mistake—the European Monetary Union faces a tough road. Firstly, there is still lack a permanent framework for dealing with fiscally weaker members—even though this issue is being addressed. But with the massive ECB/IMF/ EU bailout, they’ve managed to buy time until mid-2013 to sort through their dirty laundry.

62 | THE EXCHANGE | July 2011

“defaults in 2011 weren´t hundreds of billions of dollars as widely feared they were only 0.004% of US GDP” The EMU can bicker all they like—the fact is funds exist to fully back not only Greece, but also Portland, Ireland, and Spain for another two years. (Italy I don’t include, they are by far the fiscally strongest of the PIIGS making default unlikely.) With a bailout in place the markets reflected the fact that any real problems were a 2013 issue, and consequently bounced significantly through 2010 year-end—but it was at this point our perma-debt-fear morphed to a new “muni mania”. The theory was that thanks to the recent recession, American state income tax receipts would plummet. Simultaneously state budget

deficits were ballooning—causing a funding gap. Some pundits pointedly projected hundreds of defaults—and not just in smaller towns but major cities and even a number of big state, the sum of which would total hundreds of billions of dollars. Defaults on that scale would surely roil markets. But the remedy to potential defaults was equally unappealing— harsh austerity which might stall a nascent economic recovery, an evil dual-edged sword cutting both ways and leaving the American economy bleeding badly. That fear was widespread in January, but in reality what have we seen since then? As of June, there have been some defaults— fourteen in total. No major cities or states, but mostly tiny towns—about £372 million of America’s £1.8 trillion muni debt market—or 0.02%—an actual decrease in defaults over last year. Look at that another way—defaults in 2011 weren’t hundreds of billions of dollars as widely feared, but instead about a third of one billion—and only 0.004% of US GDP. Contrast that with last year when there were £1.8 billion in defaults—US and world GDP still grew and overall shares rose in that period. Even with that relatively small level of defaults, it’s still important to remember that “default” doesn’t mean that investors get

nothing. Defaults include delayed interest payments, rescheduled principal payments, or even missing a mandatory sinking fund payment which doesn’t impact investors at all. In a default, investors usually still collect—just not on the pre-agreed schedule date. Even during the Great Depression in the 1930s recovery rates on defaulted US munis averaged about 99.5%—and that was the worst period of muni default in US history. In other words, of the £372 million in muni defaults this year, investors will get back most (if not all) of it eventually. So for all the hand wringing and panicked projections six months ago, how can it be that we only have a handful of defaults, and not a single major municipality? Well, firstly tax revenues jumped 4.7% in Q4 of 2010. Not only that, but we can expect tax revenues to grow even faster in Q1, narrowing state funding gaps even further.

Secondly, tax revenues outpaced spending, meaning that local governments borrowed less—which is normal at this stage in a recovery. In 2010 Q4 net borrowing was down an enormous 80% from its Q3 2008 peak. Contrary to what’s been said by the politicians, tax revenues increased in the main not because of tax hikes—but because personal income, spending, and corporate profits rebounded sharply thanks to a growing economy. This happens after every recession. Incomes lag the recovery some, so tax receipts lag more—but they always come back. State funding gaps widen early, then close later. Need more signs of a muni market recovery? The cost of insuring against municipal default has recently fallen (as measured by the price of credit default swaps on muni debt). Also, it’s now evident investors who fled the muni market last year on fears of broad-based defaults have realised things are improving—

bolstered by improving deficits in even some of the worst-off states. The consequence is that investors have flocked back to the market—making rates fall. This in turn reduces governments’ future debt servicing costs—and the likelihood of future defaults. The price of muni bonds are actually up this year. The first half of 2011 is over—there’s still time for more defaults. But with rates falling, tax receipts rising, growth becoming more broad-based, and borrowing slowing—funding gaps are rapidly closing. These factors combined make it difficult to project anywhere close to the doom predicted just a few months ago now. Muni debt won’t imperil stocks in 2011—but don’t be fooled into thinking that will quite the scaremongers. The fear will morph into some new debt based anxiety. It always does. Ken Fisher is CEO & Chief Investment Officer, Fisher Investments, and Chairman, Fisher Wealth Management

July 2011 | THE EXCHANGE | 63

THE LONG| ANALYSIS

64 | THE EXCHANGE | July April2011 2011

THE LONG| ANALYSIS

Understand the markets before you trade says Stuart Rice, Director of the Trader Management Company It’s no secret that foreign exchange trading is growing in popularity. With daily trading turnover now far exceeding $3 trillion, it goes without saying that ever greater numbers of investors are turning towards foreign exchange in pursuit of more immediate, and often more volatile, returns. Despite the interest the FX market is, at the same time, often misunderstood; a fact that was reiterated to me at a recent investor show when an investor with whom I was talking turned his nose up at the mere mention of FX, suggesting that forecasts of currency movements were often derived from little more than ‘finger in the air’ techniques. What this encounter highlighted was that there remains a level of misunderstanding amongst the more traditional investors when it comes to FX trading. In a way, foreign exchange trading bears similarities to poker in that both require an acute awareness of the factors influencing one’s decision making process. Perhaps more pertinent though is the fact that, like poker, success or otherwise in the FX markets is often mistakenly attributed to chance. Whilst more traditional investment vehicles see their price movements driven in large part by speculation, the techniques used to derive future price movements in FX are often considered more of an art by those who practice them. Typically examined from two separate angles; fundamental analysis and technical analysis; the techniques employed by FX traders can prove polarizing. Fundamental analysts; who look to news events and economic releases for their trade signals; often find little reason for seeking insights from pricing charts. For technical analysts on the other hand, it is precisely these charts that offer them their opportunities to trade. I personally fall within the latter category. I am a firm believer in the old adage that history has a tendency of repeating itself, and whilst it is important to acknowledge that every moment in the market is unique, an awareness of what has gone before enables traders to more effectively anticipate what will happen next. From support and resistance levels to pricing patterns, charts offer traders a wealth of insights; all of which can be easily unlocked by using the range of tools available through most online trading platforms. If

used correctly, these tools deliver unparalleled opportunities for traders to evaluate a given currency pair’s historic price; information which in turn can be incorporated into the trader’s own forecasts of the pair’s future movements. One of the more fundamental concepts for establishing a pair’s future movement involves identifying the trending direction. Whilst rarely as obvious as a solid move up or down, by establishing the direction in which the pair is inherently trending a trader can anticipate the likely direction of any subsequent movement therein. Seemingly erratic pricing

“techniques used to derive future price movements considered an art by those who practice them” movements across timeframes produce upward, downward, and sideways trending movements on the price chart, and whilst these may not always be immediately obvious, ensuring that you are able to at least recognise them will put you at a distinct advantage when forecasting where the pair could go next. An important consideration when looking for trends is that these occur across multiple timeframes. Regular conflicts across timeframes necessitate an awareness of a pair’s performance across multiple timeframes. Whilst the timeframes selected for charting a currency pair’s value will invariably differ from one trader to the next, technical analysts tend to look for long term, short term, and intermediate trends. By establishing how the pair is trending across three broad timeframes in this fashion, conflicts can be more readily identified with confluence between trends used to highlight potential buy or sell opportunities in the pair. In addition to providing an insight into a pair’s future direction, specific buy and sell decisions can be established by the manner

in which price movements occur. Movements back and forth over time create what is known as retracements; levels to which a pair’s price temporarily reverses before resuming its earlier trajectory. These retracements in turn produce new highs and new lows, which when examined in sequence illustrate whether a pair is trending upwards, downwards, or sideways. Retracements can be anticipated using support and resistance levels as benchmarks; price ranges which represent levels to which a currency pair’s movement up or down is impeded time and again. Both support and resistance can be visualised on a trading chart using horizontal or diagonal lines. At these levels, momentum in the pair’s movement can become exhausted, in which case a retracement in the pair’s value can follow. Whilst there are undeniably elements of chance involved in foreign exchange trading, the techniques and systems available to the technical analyst make forecasting pricing movements achievable. Indeed, as the above techniques demonstrate, even the more fundamental technical analysis methods can provide invaluable insights into a pair’s subsequent price movement. Concepts such as trend recognition, support and resistance, and retracements are but a handful of the range of technical tools available to traders; the more advanced of which include a large number of technical indicators and pricing patterns. Indeed, entire industries have arisen around the insights that can be derived from these tools; my own company, TraderManagement. com amongst them. Needless to say, overall success in the foreign exchange market is, as with anything, a product of hard work and dedication. The more time you invest in learning how to spot potentially lucrative trading opportunities, the better prepared you will be to reap the rewards of a highly volatile market. By familiarising yourself with the principles of technical analysis, recurring price movements will become increasingly obvious and in time you’ll find that their inclusion within your own personal trading strategies will enable you to more accurately predict and profit from subsequent price movements. For more information visit www.tradermanagement.com

July 2011 | THE EXCHANGE | 65

FEATURE

Making Sense of Forex Trading

Stepping Your Way through a Forex Trend

66 | THE EXCHANGE | July 2011

FEATURE

In last month’s issue of The Exchange, I outlined how retail forex traders often find themselves trading against the trend. The catalyst seems to be an overriding temptation to try and pick early tops in an uptrend, or early bottoms in a downtrend. This dynamic, coupled with the reluctance of retail traders to get back on the trend when corrections are over, leads to trading on the wrong side. In this article I will outline how successful forex traders look to attack the trends and protect against corrections by using simple tools, such as trendlines and a 38.2% Fibonacci Retracement. The Forex Trader is Often Visual and Simple during Trends

I like to characterize successful forex traders as being visual and simple. They often get their clues for trades by seeing clear simple levels in charts, and define their risk by using those points. The more visual and simple it is to define a technical level on a chart, the greater the chance that level becomes important for a large number of influential traders. For example, in Figure 1.0 the chart shows the EURUSD as it trended higher from early February to early May. Early in the trend, a bottom trendline could be drawn by simply connecting a low with a higher low. In fact, by the low at point 1, the bottom trendline is established. Simple and visual. The Forex Trader likes Channels

A second characteristic of successful forex traders is they look to define trends using channels, or parallel trendlines. In our chart, once the bottom trendline is in place a parallel channel trendline can be easily drawn. The high that preceded the low is a logical place to start the top channel trendline (at white circle 1). At this point, I do not know how the trend will progress. However, there is a road map that can define risk against the respective channel “guardrails”. Traders who buy lows against the lower trendline can sell highs and thus take profit against the higher trendline. For example, a trader can sell at white circle 2, white circle 3, and white circle 4. All those levels are against a stop if the price goes above the top channel trendline. Risk is defined and risk is limited. Simple and visual. The 38.2% Fibonacci Retracement is Important in Forex Trends

When the forex market is in a trend, traders need to protect against the corrections. They

should also be prepared for the correction to finish and reverse, continuing the trend. This is where most unsuccessful retail traders lose money – i.e. by not recognizing the price can indeed resume the trend. To guard against this, I have found the 38.2% retracement provides a vital, but still simple, visual clue for attacking trends. In our chart, there are a total of four steps in the trend. The first three steps start the correction at the upper channel trendline (circle 2, 3 and 4). When resistance holds, I will overlay a Fibonacci Retracement from the respective steps low to the high. I will then target as a corrective low the 38.2% retracement of that steps move higher. For example, on the first step, the 38.2% retracement of the move higher comes in at 1.3802, the second step at 1.4058, the third step at 1.4328 and the fourth step at 1.4639. If the price goes below the 38.2%, I assume the correction should continue lower (and the big trend may be over). If the price goes below the 38.2% but rebounds back above it, the original trend should resume. On the first correction, the price dipped below the 38.2% at 1.3802 signaling a potential further downside move (see yellow points). However, on the next day the price moved back above the 38.2% and the trend higher resumed. On the second leg, the price again dipped below the 38.2% at 1.4058, but actually closed back above the 38.2% line on the same day. The trend higher resumed. Successful traders recognize these clues and look to get back on the trend. Risk is defined

by a move back below the 38.2% retracement level. On the third correction, the price fell sharply through the 38.2% retracement at 1.4328. The successful traders take the failure as a clue that the downside has more momentum. The momentum took the price below the bottom trendline, increasing bearishness. However, when the price rebounded and closed above the bottom trendline, and this gave traders a reason to buy again. On the next day, the price moved above the 38.2% retracement line and the trend resumed. The last leg higher (Step 4) moved past the upper trendline, accelerating the trend (at circle 5). Traders should not sell at this point but instead buy until the price moves back into the channel. At circle 6, momentum faded and the price reentered the channel. This is a clue that the trend may be exhausted. The price fell through the 38.2% at 1.4639, giving a second clue the trend was over. Successful traders like to keep trading simple and visual. They also recognise the importance of measuring corrections to a benchmark like the 38.2% retracement. If you are having trouble trading trends, draw simple lines, measure corrections and you should see your results improve. Greg Michalowski is the Chief Currency Analyst at FXDD www.fxdd.com He is also the author of “Attacking Currency Trends” published by Wiley, April 2011 www.attackingcurrencytrends.com

July 2011 | THE EXCHANGE | 67

THE LONG| STRATEGY

How to get the best results from the Relative Strength Index By Zoe Fiddes, Easy Forex The Relative Strength Index (RSI), a popular indicator amongst technical traders, is used to measure the strength of price movements. This indicator monitors the closing prices of a set number of the most recent bars or candlesticks and, using a mathematical formula, churns out a percentage. These values between 0-100 are represented in a line chart. In simple terms, the formula used here calculates the percentage of the last x bars that have closed higher. Therefore, if it is showing a high reading this demonstrates that most of the previous x bars closed higher which could be a signal to sell due to the price being over bought, depending on your strategy. When a price is over bought it means buyers have become exhausted and hence sellers can only sell at a lower price which forces the price down. The RSI is often used strategically with reference lines at 30 and 70 percent, which respectively act as indicators of an over-sold level (a signal to buy) and an over-bought level (a signal to sell). Due to it’s simplicity this strategy is attractive for beginner traders, however there are other signals that can also be gained from this indicator. For day traders implementing a bullish and bearish divergence strategy on a 15 minute or 30 minute candle chart it may also be useful. Bullish and bearish divergence

The bullish and bearish divergence strategy compares the price move with the RSI move, looking for a divergence in the patterns formed. Bullish divergence is observed when the price falls to the previous low or even lower while simultaneously the RSI line makes a more shallow bottom than during the previous decline. This is a signal to buy. However, note that you should only buy when the RSI line turns up from it’s bottom, and always place a protective stop-loss below the last minor price low. Bearish divergence is the exact opposite; when the price rises to the previous high or

68 | THE EXCHANGE | July 2011

“The bullish and bearish divergence strategy compares the price move with the RSI move” higher but the RSI makes a lower top than during the previous rally, this is a signal to sell once the RSI line turns down from it’s top. As before, remember to place a stop-loss above the lastest minor high. The image below is an AUDUSD 15 minute candle chart with a 14 period RSI below. The first AUDUSD high can be seen at 1.0648 (marked with the red dash line) which created an RSI peak at 75.80. When the price returned to this high the RSI was lower at 71.4; this is bearish divergence - a signal to sell. When the

price returned and moved higher than 1.0648 the RSI was lower again at 67.14; again, this is a sell signal. Before planning to use a new indicator it is important to understand it first. I have seen many novice traders using the RSI who do not know how the 0-100 values are calculated. If you understand the theory behind a signal you will be able to trade off it with more success. When using an indicator for the first time practice it and perfect your entrance points by recording each trade with the reason why you entered, noting your stop-loss and take profit levels. If your risk, calculated looking at nearest lows or highs depending on if you are buying or selling respectively, is greater than your profit target then don’t trade off the signal.

Forex trading involves substantial risk of loss. Do not invest money you cannot afford to lose. The information provided in this article does not constitute a recommendation on the part of easy-forex® under any applicable legislation, nor an offer or solicitation on the part of easy-forex®, to enter into a business relationship with the reader of this article. Easy Forex Trading Ltd is licensed by CySEC – License Number 079/07.

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THE LONG | ANALYSIS

CHART WONK #9

Accumulation Swing Index Study changes in buying and selling over time with Chaikin Money Flow says Declan Fallon of Zignals.com The Chart: Microsoft (MSFT) from Zignals.com charting application

What does it all mean? Accumulation Swing Index (ASI) is a variation of the Welles Wilder’s swing index. Its goal is to identify the ‘real market’ value for an asset. It was originally designed for use in futures trading, but can be applied to any market where an open, high, low and close price of the day and open and close for the previous day is available. Further details can be found in Wilder’s book, New Concepts in Technical Trading Systems. How does it work? The ASI plots a running total of the swing index of each bar; a positive swing index is assigned to an up bar (0 to 100) and a negative value to a down bar (0 to -100). The ASI is therefore bound between -100 and +100. During a rally the ASI trends higher and in a decline it pushes lower. Because the ASI is a cumulative value of the swing index it’s less prone to signal churn.

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ASI is positive during a long-term bull market and negative in a long-term bear market. Movement around the zero mid-line is associated with a trendless market. ASI is heavily weighted to the closing price and as a result is less susceptible to intraday surges. So what are the signals to look for? The ASI is used to confirm or deny trend line, support or resistance breakouts on price charts. Trend lines are drawn on both the price and indicator chart and then compared against each other to confirm whether a price break is true. It’s best used as a confirmation tool in combination with other technical indicators and charting patterns. In the Microsoft chart, a number of ASI examples can be found. The price breakout in late April 2010 was not confirmed by a new swing high in the ASI. The breakout quickly faltered

as prices collapsed inside the prior base. It didn’t take long before the February price swing low was tested and eventually breached; the breakdown in price was confirmed by the breakdown in the ASI. On the flip side, a price breakout in November 2010 wasn’t confirmed by a break in the ASI, another warning sign to the validity of the breakout. The November breakout eventually fell back inside its prior base, but loses were not as deep as was the case in May. December 2010 saw a fresh price breakout above the November price swing high which was confirmed by a new swing high in the ASI; a ‘buy’ signal. In addition to trend line and support/resistance breaks, ASI can also be used to spot divergences to price. Bullish (bearish) divergences occur when a new price swing low (high) is not accompanied by a new swing low (high) in the ASI. Positive (negative) divergences occur when the ASI makes a lower low (higher high) but price makes a higher high (lower low), this is deemed bullish (bearish). ASI divergence can be used to track short-term reversals as part of the broader trend. At the end of November 2010, ASI for Microsoft made a new lower low, but this was not confirmed by a new lower low in price - a positive divergence (purple line). This divergence provided a springboard for the rally which led to the December breakout. At Zignals.com, use the Freeform crosshair function to compare price and ASI values to help identify breakouts and divergences. Because ASI is a price-based indicator, it can be used in conjunction with other price indicators such as moving averages or Bollinger Bands, although such use is atypical. When do I make my move? Signals are generated when the prior swing high or low of ASI is breached; a buy in the case of a new swing high and a sell for a new swing low. Divergences may provide alternative entry/ exit points, although confirmation from other price, volume or technical indicators will always strengthen any given signal.

THE LONG| ANALYSIS

In his latest article Peter Webb explains how sports traders can book a profit simply by watching time slip away It’s been said many times that “Two things are certain in life, Death and taxes”. There is a third however, the passing of Time. Anybody in financial markets will be familiar with the time value of money, more specifically the effect on options as they move to expiry. Sports markets are not that different. Both have an underlying value, volatility and time value. As we know, time only moves in one direction within our current practical understanding. Therefore in a sports market context it’s possible to see the future and profit from it. The reason this strategy exists is thanks to the ability to bet in-play on exchanges, in other words you could bet as the sport was being played. This was a useful tool if you backed something before an event started and changed your mind; you could quickly reverse your decision by backing something else. That was typically how most people used in-play betting, but that tactic was only scratching the surface of in-play’s capabilities. The core principle behind using time to profit is that as time ticks away the chance of something happening in any sports event gets much more likely. By backing and laying ahead of this expected movement, you can profit. The key determinate in this tactic is that the sport you are betting on has to be time limited, it has to have a definite end. Tennis, for example, can go on for an infinite time; there is no time limit to how long a match can last. It is the end point in time that will create a definite, predictable, movement in odds. What you need is a sport where there are long periods of time where nothing, but the time to the end of the sports event, will change. The ideal sport for this tactic therefore, is football. We definitely meet our criteria here in that each match lasts for a pre-defined period.

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As a match progresses, the chances of a team winning or drawing will move in line with the underlying score, but also with the amount of time left. You also have a significant advantage that, on average, there are very few goals in a match. That generates long periods of time where the only thing that is moving the odds is time itself. Let us say Team A is leading 1-0 after ten minutes, it still has 80 minutes to protect its lead over the rival team. But Team B is leading 1-0 after 80 minutes and therefore only has 10 minutes to protect its lead. You would correctly guess that there is probably a good chance that in Team A’s case, the other team could score at some point in the remaining 80 minutes, but team B has a much better chance of defending its lead with just 10 minutes remaining. Therefore the chance of Team B going on to the win the match is obviously significantly different to Team A. The difference can clearly be expressed as “time value” and the odds will definitely be different as there is 70 minutes of time value between these two scenarios. As time ticks away, something gets more likely and therefore the odds in this case will get smaller, representing this fact. In the first illustration we are looking at the price of a draw. You can see that as the match has progressed and no goals have been scored the odds on the draw get lower and lower as it becomes more certain. As time has elapsed, the price of the draw has changed to reflect this increased certainty. Time also changes the price of the home team and away team as well, but, in simplistic terms, they will generally drift instead. By backing the draw when the scores in the match are equal we know that the price on the draw must get smaller. When the price

THE LONG| ANALYSIS

“it’s possible to see the future and profit from it. The reason this strategy exists is thanks to the ability to bet in-play on exchanges” gets smaller we can place a lay bet at the lower odds and profit from the difference. This strategy works well on soccer because there are often long periods without any goals in a match. On average there are around 2.60 goals in a match and those goals are spread out over 90 minutes or so. So, on average, you have around 30 minutes between goals where the odds will move due to time alone. Your objective is to get some money out of the market at the lowest possible risk. The lowest risk, if you use this strategy, is to be in and out of the market as quickly as possible. The longer you are in the market, the more chance there is that a goal could be scored. If a goal is scored you could face a potentially large loss. We say could, because if the favourite scores first, the odds on a draw will certainly get larger. If the weaker team scores first the draw could actually shorten in price. On average there is around a 40% chance of the away team scoring first. There are other ways that you can reduce your risk. You may want to try and pick moments when the match is favourable from several characteristics. By this, we mean you are looking for periods of the match where the time decay is strong but where a goal is less likely, or where a goal will be beneficial to your strategy. The speed at which odds shorten is faster in the second half, so using this tactic in the second half is often more effective. If the team priced with bigger odds, is dominant or attacking; then that is safer than if the home team is attacking. If you are only in the market for a very short period of time you may also want that time to coincide with a general lack of activity, or perhaps a

period where less goal scoring chances are being created. If there is an injury, the crowd keeps the ball; the key striker is off the pitch for treatment or if there is a general lack of activity, time still decays but at a less risk to you. Of course the problem with backing the draw and waiting for the price to change is that a goal will radically change the odds. Even then a draw will be the final result around 25-28% of the time so a goal shouldn’t necessarily be a time to panic or accept the loss. Depending on how much risk you are willing to take there are other strategies you can adopt as well. If a team is 1-0 up and there is still time on the clock then the chance of that team winning will get more and more likely. If you choose to back them when they have a free kick, you get a double the chance of profiting. If they score from the free kick, then the odds with jump dramatically in your favour. If they don’t score then the time decay will tick in your favour, allowing you to get out a few minutes later. Another way to hedge your risk on time decay is to back multiple selections of correct scores such as 1-0, 0-0, 0-1 and 1-1. Bet Angel includes a tool that will let you do this and benefit from the more generic decay of time. This is less narrow and less risky than just one outcome or score line. Correct score odds can move in unusual ways though, so Bet Angel also includes a specialist odds forecasting tool specifically aimed at mapping time value called Soccer Mystic. Benefitting from time decay is an unusual way of profiting from sports markets. But if you want to minimise your risk significantly and participate in the market without waiting for something to happen, then profiting from the decay of time is a useful strategy to put to use.

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THE LONG | ANALYSIS

Making sense of Sports betting market analysis

How to use your trading skills to make a profit on the spread betting exchanges. By Tony Hargraves, Academy Director for Centaur Academy

In the modern world of currency trading you don’t exactly have to be a celebrity on Wall Street to make great profits from the market. With huge liquidity being generated from a $4 trillion daily turnover, round the clock trading and high leverage options it’s easy to see why so many people are attracted to forex. To break into the market you now need nothing more than an internet connection and a small deposit with a trading site. In many ways, sports markets and financial markets share similarities that many people would not deem to have existed. A sports analyst who is trying to price the match odds market between Manchester United and Arsenal can have similar methods of analysis to those a stock analyst uses when trying to analyse the price of a stock for a new start-up company to determine whether it is worth investing in. There are two main schools of sports trading analysis. The first is related to the study of the fundamental aspects of the event you’re analysing, and the second is related to the study

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of the technical aspects including figures and charts. There are no rights and wrongs, and each analyst may have their own preference as to the strength or significance of each. A hybrid or mixture of both is definitely recommended, as this method gives you a good idea of the overall picture of the event you are analysing. With fundamental analysis you should take an elementary view of the game and analyse some of the qualitative information that the statistics do not have. You can take an overall quasimacroeconomic view by analysing the overall quality of a particular league and in turn compare it to the quality of the teams and players involved, or you can take a game specific view and look at factors such as: • Will the weather affect the game? • Does the referee have home/away biases? • Are there significant injuries to either team? • Are there in form/out of form players on either team? This fundamental analysis does not have to be purely qualitative information, but you

can address the issues that are less tangible and cannot quantify in an attempt to factor them into your technical analysis. Technical analysis is different by virtue of the fact that you are purely looking at the numbers and analysing the figures and charts in order to identify patterns to help you come up with a trade. You are examining the historical performance of the teams and using it as an indicator of likely future performance. You can compare Stock XYZ in the FTSE 100 market to Manchester United in the Manchester United vs. Arsenal Match Odds markets. One of the main attractions of the sports markets is the fact that the duration is finite in comparison to Stock XYZ, which can go without movement for days. You know that the Match Odds market will expire after 90 minutes, and during those 90 minutes there will be great volatility and movement which is ideal for trading. Now how would you go about finding out the correct prices for this match? Well, for one you should take into account Manchester

Andrew Barker / Shutterstock.com

THE LONG | ANALYSIS

United’s home record, and compare it to Arsenal’s away record. In the last 5 years Manchester United have won 82 out of 95 home games in the Premier League, which is a win ratio of 86.31%. So the average price for Manchester United to win every time they play at home should simply be 1/0.8631 (the percentage number of times they have won over the designated period), which in this example is 1.16 based on those last five years. Of course, that’s not the true reality of the odds on a match-by-match basis, as you have to factor in the different quality of opponents they play against over that period. Against top five opponents (the four other best teams in the Premier League) Manchester United have won 15 of their 20 home games at home over the same period, which equates to 75% or 1.33 odds. As well as form, home records, or simple head to heads, you can also look at the probability generated using various statistical methods e.g. a Poisson Distribution, which can be applied to the sports markets.

“you can also look at probability using statistical methods e.g. a Poisson Distribution” Poisson’s Distribution enables you to calculate the probability of an event (e.g. a goal) over a fixed period of time (e.g. 90 minutes) for a team, and it can be used as another method to generate the probability and odds of a team winning. Of course, the more information you have, and the more informed you are through analysis, the better the decisions you ultimately make will be. Through technical analysis you are essentially trying to establish a tiny range of probabilities within which to place a wager (preferably +/- 5%). You should then enable yourself to loosen that range based on the fundamentals (e.g. weather/injuries/managerial

changes) and devise a price range within which you can make a decision whether you think you will back your selection to win. If you believe Manchester United are between 70%-80% to win a game but the odds given represent a probability of 60%, then you should back Manchester United to win. The basis of any trading decision I make is not based on whether I think the team will win a game (the eventual outcome) but whether a bet on them represents value. If my analysis shows Manchester United should be priced at 1.30 and they are 1.60 on the exchange, I will back them, yet if they were 1.20 I would lay them as that represents the value. If you continually find value bets, you will end up a long term winner. If you constantly take bad value, your final result will inavriably be the opposite. Centaur Academy offers expert training in sports trading, and provides daily analysis of the Sports Exchange Markets. For more information, please visit www.centauracademy.com.

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THE SPREAD

SPREAD THE

IN THE SPREAD... NIGHTCLUBS GADGETS CITY GUIDE: BASE TRAVEL RESTAURANTS

SWEET SUITES South East London wouldn’t be the first place you’d look for one of the Capital’s finest hotel suites, but this is unlike anything you’ll find elsewhere in London. The hotel cleverly provides four cool, chic loft suites in wildly different sixties’ inspired décor, which can be mixed and matched to the client’s wishes, providing what we think is the most unusual five star experience in town. Each suite is name-checked after ladies from iconic 60s songs (Lilly,

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Jude, Ruby and Lucy) with each appointed in a punchy, decadent design, making them ideal for an spoiling weekend escape. Each highly-stylised room features all kinds of gadgets, including Apple TV’s to integrate with laptops and iPads, and connected outdoor terraces. Your only difficulty will be to choose what combination you want, but when choosing this most delicious of pick’n’mix, make sure you include ‘Lucy’ to enjoy her own private 8 person hot tub, overlooking

Up to 50% bonus* on your first deposit! Promotional code: theexchange Contact an eToro representative at www.etoro.com for more information. * Limited to July, up to 1000ÂŁ The eToro trading platform is a product within International Capital Markets Pty Ltd (ABN 12 123 289 109, AFSL 335 692). Trading of contracts for differences, foreign exchange contracts, derivatives and other investment products which are leveraged, can carry a high level of risk, and may not be suitable for all investors. It is also important to note that past performance of financial products or investments is no assurance of future performance and itâ&#x20AC;&#x2122;s recommended that you seek independent professional advice. A Product Disclosure Statement (PDS) is available from our website www.etoro.com.au or by calling us on 1300 466 256 and should be considered before making any decision to deal in our products.

THE SPREAD | NIGHTCLUBS

The Global Party One Key, 80 Luxurious locations and only 24 little hours...

When we think of memorable charity events and fundraisers, what springs to mind as the biggest and to the grandest scale? Well, if you cast your mind back to 1985, you’re bound to recall the answer. In that year Sir Bob Geldof was struck when watching a television report by Michael Buerk with an idea so noble and so ambitious it would forever be etched into the annals of history. The report highlighted the famine that had hit the people of Ethiopia, and it was this event that drove The Boom Town Rats Singer to call his nearest and dearest in the music and entertainment industry, and asked them to put on a show that the globe would never

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forget. The 13th July 1985 saw one of the world’s largest scale satellite link ups and television broad casts of all time and raised an astounding £30 million for famine relief, with Britain contributing £1,100,000 of the total. An incredible feat that until now has never been followed, never to quite the same scale of innovation at least. And just how extravagant a party would one have to throw in order to follow an act like Geldof and be considered for the Guiness Book of World Records for memorable charity events? How many people would have to attend an event of such an extended scale in order to raise

these kinds of life changing millions for charity? Two men who think they may just have found the answers to these questions are Lord Stanley Fink and David Johnstone, with an idea that arose in the shape of a hot air balloon and has heightened into an event inspired by fictitious British explorer Phileas Fogg. The Around the World in 80 Days concept has been impressively re-boxed to house the tag line ’80 parties around the world, in 24 little hours’. And the final result: The Global Party. The event will co-host 80 parties around the world for one day only, with 80,000 of the world’s elite expected to attend the party marathon. The lavish parties will be hosted by the owners

THE SPREAD | NIGHTCLUBS

of each of the venues in London, New York, Delhi, Cape Town, Shanghai, Rio De Janerio, Hong Kong and Marbella, to name but a few locations across the globe. This exclusive charity event is invitation only, and the invitation will come in the form of a special edition Key-2 luxury silver key ring. The key will enable the holder not only to choose which of the 80 worldwide luxury venues they wish to attend, but also give them access to 1000’s of personal contacts and exclusive VIP privileges for life. The group of Hedge Fund managers who have organised the event aim to raise at least an impressive £10 million for the fifteen charities

benefitting from the event, whilst at the same re-define the benchmark of the biggest party the world has known to date. All proceeds will contribute to support altruistic charities including IAA – The Duke of Edinburgh’s Award, IIE (Institute of International Education), Blue Marine Foundation, Sentebale, ARK (Absolute Return for Kids) and TUSK. If you are considering joining the likes of Simon Cowell, Liz Hurley, Jenima Khan, Damien Hirst and Boris Johnson, just a few of the celebrities who have already confirmed their presence for an event that will unite the most prestigious elite from the world of

media, fashion, society and business, then be prepared to part with an admirable sum, as donations for the desired keys will start at £1,200. But with 25,000 pairs of tickets available to purchase by companies and individuals giving you access to any club of your choice on sale now, there really is no time to delay on picking up your ticket to the sure-fire party of the year. Come the 15th and 16th September London will be a hive of Global Party activity, with six venues already confirmed as hosting parties of their own for the event. Go to one, or go to all. But whatever you do, make sure you go to the Global Party.

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THE SPREAD | CITY GUIDE

HOW DO YOU SOLVE A PROBLEM LIKE SWITZERLAND? Basel exists in a bubble of enigmatic diplomacy, but what’s it hiding? Mark Southern investigates what’s behind the Everyman of Europe’s discreet exterior Switzerland; it’s a hard country to pin down. If it were to turn up at a party, you’d find it standing in a self-assured but humble manner somewhere near the boisterous kitchen, but not quite inside, where the brash US is holding court, all the while patronisingly patting the overly-attentive UK on the head. Not, for Switzerland, though. Instead, it’d be having a perfectly nice time, drinking a nice mid-price but quality Bollinger (nothing too flash), and would most likely be completely oblivious to the fact that a sexually predatory South American state was chatting it up. Meanwhile, absolutely no-one would be saying mean things about it behind its back, but then most would have forgotten it had even turned up as well. Because, whilst many countries elicit a strong emotion, good or bad, it’s nigh-on impossible to find anyone with anything other than pleasant apathy for good ol’ Switzerland. After all, everyone loves a nice guy, but they never get the girl, right? But is there more to the quiet man of Europe than the polite, forgettable party guest? Is there nothing behind its uncontroversial eyes, or does there lurk hidden fires within? Basel, located at the Northern most point of Switzerland, is a perfect example of this polite neutrality, and famous for almost nothing. However, speak to those in the know, and they’ll tell you that, much to its presumable chagrin, it’s picking up something of a reputation. As a weekend getaway hotspot, that is. And when you scratch beneath the surface it’s obvious why. Beautiful storybook architecture mixed with rich culture, friendly and hospitable locals, and a calming aura that warms the cockles. What’s not to like? Sure, some may find it all a little bit, well, too nice to decamp here for more than a charming weekend. But it’s very hard, if not

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impossible, to experience 48 hours in Basel without feeling all your stresses and strains melt away, and that’s the point of a great weekend break. The food’s good, the wine’s better, the air feels like it’s been put through a purifier, and it simply makes you feel chirpier about life. It’s a lovely place, and shouldn’t life be lovely? For, it turns out that whilst sexy Italy swans around the party trying to seduce the rich, badboy nation de jour, it would do a lot better to cosy up to familiar Switzerland, and be bowled over by its depth of character underneath that enigmatic Basel facade. Cheers! Where to Stay

As Channel Four television presenters never tire of telling us, the most important thing in homes and hotels is location, location, location, and this couldn’t be more true than in Basel. It’s a small city, but to experience the very best

of it you should be right in its epicentre for maximum exposure to its charms. Fortunately, there is an outstanding hotel that allows you to do just that in the Swissotel Le Plaza. It’s comfortably the largest hotel in town, but don’t lead you into thinking it’s lacking in quality. Instead, it combines modern minimalist style with splendour in keeping with the local culture. Even the most basic of rooms is first class, but for a real treat try one of the hotel’s Plaza or Presidential suites. Both are dazzling in size and opulence, and channel a bygone era of moviestar glamour from studio-era Hollywood. Stunning. It’s a great business hotel too so, with the strong link between the London City and Swiss banking, it’s an ideal place to hole up for the weekend whilst entertaining clients in the ô Bar. www.swissotel.com/basel

THE SPREAD | CITY GUIDE

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THE SPREAD | CITY GUIDE

Where to Eat

Where to Party

If rich food is your religion, then Basel will be your culinary heaven. On every corner harks another aromatic delight serving deeply satisfying Swiss fare, which leaves you wondering why the chic, stylish locals aren’t the size of cathedrals? The best place in town is the two Michelinstarred Cheval Blanc, which is almost universally regarded as the undisputed king of cuisine in Basel. Award winning chef Peter Knogl promises to take diners on a “journey of sun-kissed shapes and shade” with his Mediterranean haute cuisine, and delivers every time. All is good, but the pigeon breast and artichokes remain a highlight. Don’t miss out on a truly unique dining experience, but book early or you’ll miss out. www.lestroisrois.com

By day, Basel’s a chic place to be, and the nightlife follows a similar theme. This isn’t somewhere you’ll be bumping into the scourge of every weekend break, the stag party, but instead you’ll be rubbing shoulders with Swiss high society elegantly oozing class. The best place to do this in style is The Old City Bar located in the Hilton. Styled like a British private members’ club, the wood panelling and rich leather décor is the setting for the nightly pilgrimage to prosperous partying. Enjoy the cocktails and then head down into the Hilton’s Allegra Club for the salsa nights, with tuition for those that need it. www.hilton.com/basel

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High Roller

Make no mistake, Basel, like much of Switzerland, has plenty of cash, and isn’t afraid

to spend it. Conveniently for tourists who enjoy a flutter, this means there are plenty of casinos to test your nerve. The best of these is the Grand Casino Basel that not only houses everything an international high roller like you would look for in a prestigious gambling den, but also features performances from all kinds of incongruous music artists, meaning you’re just as likely to win the jackpot as bump into Cyndi Lauper in the lift. Get yourself along to here if you just wanna have fun. www.grandcasinobasel.com Quirky

The architecture of Basel is best observed at street level but, whilst Basel’s not a particularly big place, who wants to walk around to see the sights when you could be out experiencing the future of transport instead?

THE SPREAD | CITY GUIDE

Segwaying is that transport, and it’s remarkable. Looking like a futuristic broom on magic wheels, the segway uses space shuttle technology to stay upright, meaning you simply lean forward to go and back to stop. The sights speed past at a leisurely pace, whilst downhill speeds ensure a rare thrill of sight seeing exhilaration. www.segwaycitytours.ch

before it closes in September. www.nmb.bs.ch Wildlife

Cultural

Basel isn’t noted for its plentiful animal activity, but it does possess a rather excellent zoo. Featuring hundreds of star turns, from African big cats to South American primates, there’s plenty here to keep you occupied if you’re looking to revisit your inner-child.

Quaint European cities often have reputations for being culturally-rich hotspots, and Basel is no different. The city is awash with galleries, museums and artisans, and those wishing to add a layer of enrichment to their trip will have no problems here. If you’re only going to see one place though, make it the Natural History Museum. Hours can be lost inside these four walls, but whatever you do, don’t miss out on the Deep Sea exhibition

It seems a shame to be so close to the Alps’ world-class skiing resorts without popping over to indulge. Don’t follow the crowd by jumping on the three hour train though; instead hire a chauffer helicopter to get there direct in just 30 minutes. A much more pleasant way of doing things. www.swissheli.com

Getting There

BMI now fly from Heathrow to Basel daily. Check out their outstanding business class, complete with stunning Heathrow lounge; it’s as good as you’ll find. Also, keep an eye on their website as they often have monthly sales on flights. www.flybmi.com

Extravagance

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THE SPREAD | GADGETS

Travelling, techno-style Looking forward to getting away over the summer, but can’t bear to be apart from the world of high tech gadgets for two weeks? Neither can Mark Southern, who has been scouring the markets for the best travel gadgets on offer this season.

Sennheiser MM 550 There’s few things more annoying to the regular traveller than headphones getting tangled or restricting movement. Fear not, though, as you can now bin those awkward, messy wired things poking from your MP3 player, and replace them with these seriously special Sennheisers. As you’d expect from the world’s leading audio company the sound is spot-on, but it’s the brilliant Bluetooth functionality that make these a must-have on this list, allowing you to kick back and enjoy the first class flight without second-class technology tying you up in knots. www.sennheiser.co.uk

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THE SPREAD | GADGETS

Vuzix Eyewear Wrap 920 Are you the kind of person for whom size matters? Sure, mobile screens have got bigger since tablet computing became so de-jour, but are you still missing the 67 inch 3D TV from your home cinema? If so, salvation has arrived in the form of these incredible video glasses from Vuzix. Simply plug the glasses into pretty much any form of video output, including smartphones and gaming devices and sit back and wonder as the huge screen comes to life in front of your very eyes. So, as you settle back to enjoy the latest blockbuster in widescreen 3D, your fellow passengers will simply see you looking slick with your sun-shades on. www.vuzix.com

The Bluebeards Revenge Perhaps the surprise of this list, The Bluebeards Revenge is a male grooming phenomenon that every regular international traveller should be aware of, particularly those needing to look sharp for clients after a long flight. The luxury shaving cream contains a miracle ingredient called decelerine that magically reduces hair growth every time you use it. We must admit, we were dubious about its claims to reduce stubble by 70%, but our tests achieved easily this, if not more. Astonishing results, and more time to sleep on the plane. www.bluebeards-revenge.co.uk

iPad 2 Whilst strictly speaking not the first tablet computer on the market, Apple’s behemoth is still the daddy of the industry. Sure, Android machines are getting closer, and in some functions outperforming it, but for an all-round experience nothing comes close. Some have said the iPad2 doesn’t represent much more of an upgrade from its first incarnation, but those that do miss the point; it was brilliant in the first place, and this second version simply tweaks the bits that needed it. Slick, sleek performance and functionality, combined with a massive selection of great (and not so great) apps, plus the excellent Kindlekilling iBooks means this should be in every regular traveller’s hand luggage. www.apple.com

Proporta USB Turbocharger 5000 The rise of smartphones has brought the office to your pocket, but it can’t just be us who gets frustrated that their batteries can’t manage a transAtlantic flight without giving up the ghost. The Proporta Turbocharger makes these fears a thing of the past, providing five full charges from its pocket-sized punch. Simply plug into it and sit back looking smug, whilst your fellow travellers start waving their smartphone around in frustration a few hours later as it dies on that important work call. www.proporta.co.uk

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THE SPREAD | RESTAURANTS

Restaurants of the Month We’ve been diligently traipsing the streets of London once again to bring you our best findings of the month

Massimo Restaurant & Oyster Bar Northumberland Av., W1A 2BD Situated in the heart of the Corinthia Hotel just a stone’s throw from Embankment, Massimo is a new restaurant already gathering a reputation as one of the best places to dine London has to offer. Head chef Massimo Riccioli has crafted an exquisite menu specialising in seafood, and as well as the restaurant Massimo also houses a superb oyster and crudo bar for passers-by looking to sample some of the best tasting delights of the sea to be found anywhere in the capital. Crudo dishes such as Scallops with orange and vanilla salt and Grey Snapper cerviche will take you on a culinary journey the likes of which you’ll have rarely, if ever, been on before, and if oysters are your particular indulgence of choice then you’ll find yourself in heaven the moment you step through Massimo’s doors. But it is in the restaurant itself that the pinnacle of the Massimo experience awaits. An extravagance of fish and shellfish dishes to pick from makes choosing just a handful an almost impossible task, and coming back to explore everything else Massimo and his kitchen have to offer an inevitability. Our highlights, however, were the “Carmelo style” linguine served with clams, prawns, squid and mussels, and the beetroot gnocchi, both of which were divine. And if you’ve still managed to retain some of your appetite then the crème brûlèe flavoured with stem ginger and the zabaioni will take your breathe away. A truly fantastic dining experience. www.massimo-restaurant.co.uk

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McQueen 55-61 Tabernacle Street, EC2A 4AA If you’re looking for a relaxing but vibrant dining spot in central London then there’s only one name that should be on your lips, McQueen. This suave, stylish, refined venue combines the high life of the West End with all things burlesque and theatrical. Having always harboured an interest in the screen hero McQueen, I was eager to soak up the atmosphere generated by the decor and subtle nuances only true fans of the legend would appreciate. The McQueen menu, wrapped in silver and gold, was simple and easy to understand, yet full of lip-smacking dishes which would leave any reader restless for their food to emanate from the kitchen. Head Chef, Anupam Som has drawn on his American roots to create a largely Stateside-inspired menu with a European touch. We started with the goat cheese and seared scallops. Both dishes were exceptional in both presentation and taste, and left us with a longing for more. The McQueen American Grill has a selection of the finest beef and lobster, the thick 6oz steak was mouth-watering and perfectly done while the lamb was moist, succulent, packed full of slow-cooked flavour. These dishes where accompanied by Monterey cheddar mash and creamed spinach, delicious and complementary to the main course. Having no room for dessert we enjoyed wine and cocktails from a comprehensive menu selection, which were all excellent and complimented our meal exquisitely. For our McQueen gives many of London’s more established diners more than a run for their money, and will certainly be one of our most frequently visited restaurants in the future. I couldn’t recommend it higher. Stacey Wright www.mcqueen-shoreditch.co.uk

THE SPREAD | STYLE

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THE SPREAD | STYLE

Hollywood smiles used to be the preserve of the silver screen elite. Mark Southern investigates the growing phenomena of British men’s quest for movie-star teeth Hollywood smiles used to be the preserve of the silver screen elite. Mark Southern investigates the growing phenomena of British men’s quest for movie-star teeth Ah, great, Great Britain. The land of hope and glory, mother of the free. Birthplace of the Beatles and home of heroic Horatio Nelson. And, as far as the rest of the globe is concerned, the undisputed nation of nasty gnashers. That’s right, despite Albion’s illustrious history, push aside the Carnaby Street clichés and Austin Powers revealed what the world really thinks about us; congenial and wellmannered, but cursed with old Blighty’s oral blight poking out from our gums. But, changes are afoot. Or more pertinently, amouth, for thousands of Brits are finally following in the footsteps of our American cousins in seeking out cosmetic dental surgeons to rid themselves of their poor teeth, and give themselves a smile more akin to 007 than Mike Myers’ International Man of Mystery. And the surge to tackle this teething trouble is currently (Moon)raking it in for the UK’s very best dental experts as a particular kind of patient is emerging as the fastest growing demographic seeking James Bond jaws; namely, successful City men, who simply can’t say (Dr) No to looking good, and are happy to put their money(penny) where their remodelled mouth is. (Ed – one more terrible James Bond pun and you’ll never write for this magazine again!) Britain’s leading cosmetic dental expert, Dr James Kleiber is unique amongst his peers as he operates a City based practice, but also has a stunning dental retreat in the Hampshire countryside; less than an hour from London. Award-winning Dr James has seen his patient list change significantly over the past three years, despite the credit crunch hitting luxury spends. “A decade ago”, he explained, “wealthy women made up in excess of 90% of our major cosmetic dental work. They were looking to emulate famous models and actresses and have perfect teeth, whilst the small number of men we were seeing were mostly correcting sporting injuries. However, around five years ago, we started to

“No one seeing a photo of me would have ever guessed as whenever a camera turned up I shut my mouth completely for fear the world would see my awful teeth” get a few more successful men coming through the door wanting to rid themselves of imperfect teeth and replace them with Hollywood smiles. Most of these were City bankers in their thirties and forties, and were embarrassed to be coming in. Since then, however, the floodgates have opened – perhaps because these first few ‘pioneers’ turned up at the office on Monday morning with perfect teeth, and everyone else wanted the same. Now, successful male patients from the City account for 40% of our client list, and this figure keeps increasing.” Simon Kahn was one such trader who traded up from his old teeth to something more becoming of a successful man in these imageconscious days when he undertook a smile makeover with Dr James in 2010. “Throughout my life I’d always done well and felt accomplished in my career and in my personal life. However, no one seeing a photo of me would have ever guessed as whenever a camera turned up I shut my mouth completely for fear the world would see my awful teeth. I felt my terrible smile completely ruined my face, and lost confidence in my appearance because of it. Last year I finally decided to do something about it, and went to see Dr James for a complete smile-makeover on a lunch hour. He made what would have been a pretty stressful process not only simple but even enjoyable, and talked me through the entire procedure of having intense teeth whitening for my ‘good’ teeth, and veneers placed upon my five ‘bad’ ones.

I signed up and then, had some x-rays and a couple of preparatory bits and pieces, and then took a long weekend off work to head down to the Hampshire countryside to Dr James’ retreat. The retreat sorted all of my accommodation at the local Four Seasons, and took care of all my transfers, leaving me relaxed about the impending dental surgery. Sure enough, surgery day arrived with Dr James’ team making me feel completely at ease before we began the transformation. It’s a funny thing sitting back in the chair for three hours, listening to classical music whilst having your mouth worked on, which you can’t feel because of all the numbing anaesthetic, but it felt oddly ethereal. Soon enough, though, everything had been done, and it was time to see myself in the mirror for the first time that day. The result was incredible. Everything I hated before about my teeth, I now loved, and it was like looking at someone else. Dr James had also used a bit of botox and fillers on my skin and lips too, which made the transformation even more amazing. Afterwards, I was worried about the reaction of my colleagues, but on Monday I went in and everyone was complimentary, and many have since had it done themselves with Dr James. I now feel much more confident at work and in social situations, and I would rate it as one of the best things I’ve ever done in my life. Everyone should do it!” Simon’s story is just one of many as the City of London becomes a more dazzling place to be, in every sense. Indeed, Hollywood smiles are now the calling card of a successful man. Maybe you should try it too. After all, it’s better to be known as ‘The Man With The Golden Smile’ than ‘Oddgob’, right? Dr James Kleiber runs a City of London consultancy and Hampshire retreat, and is considered the best cosmetic dentist in England. Check him out at www.dentalretreat.co.uk. Mention The Exchange Magazine and you’ll get 50% off your consultation too.

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CLOSE THE

There’s only one Dead Cert at Wimbledon With Wimbledon now in full swing and the spread betting boards teeming with opportunities to make money from the UK’s sporting summer beacon it would be remiss of The Exchange not to heed the cautionary tale of a sports bettor whose love for the game led to him getting his fingers burned last month. The mystery punter, labelled Dead Cert Man by the tabloid press, had won 26 consecutive bets with bookies William Hill (a new world record), of which a number were placed on boxing and cage fighting, but the majority on tennis. From an initial wager of £8,400 he had raked in £160,000 of profits, in the most part by betting on heavy favourites. However, not content with his winnings, he decided to place one more wager on his favourite player, Novak Djokovic, in an attempt to carry his winnings over the £200,000 threshold. The bet: £120,000 (another world record for the largest bet placed on tennis match) on Djokovic to beat Roger Federer in the semi-finals of the French Open. Federer went on the own Djokovic and the match, ending the Serb’s 43 match unbeaten start to the calendar year, and dumping Dead Cert Man’s winning streak (and profit) at the same time. There’s a whole host of strategical issues, and morals, to be learned from this story, but the one we picked up was this...however you choose to make money on the exchanges this Wimbledon, just don’t bet against Roger Federer. He’s not called the G.O.A.T for no reason.

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IN THE CLOSE WHO’S WHO GLOSSARY OF TRADING

Execution-only online broking from just £4.75! JPJshare.com enables traders the ability to buy and sell shares in companies listed on the LSE, AIM and PLUS markets, from as little as £4.75 commission per trade! In addition, it offers ISA’s with a £0 annual management fee. JPJshare.com charges by far the lowest online dealing costs available to UK investors, but don’t take our word for it, see how we compare with the competition: Broker

ISA Admin Fee

Standard Dealing Cost

Frequent Trader Dealing Cost

Hargreaves Lansdown

0.5% capped at £200 per annum

£9.95-£29.95

£9.95 (plus a quarterly management fee of £12.50)

RBS

£25+vat per annum

£15

£12 (for Elite service - if you have paid £2,500 in commission in a year or have £250,000 in assets in your account)

Nat West

£25+vat per annum

£15

£12 (for Elite service - if you have paid £2,500 in commission in a year or have £250,000 in assets in your account)

Barclays

£0

£12.95

£9.95 (when you make 15-24 trades per month) or £6.95 (when you make 25 or more)

T.D Waterhouse

£0

£12.50

£8.95 (when you make 15 or more trades per quarter)

Halifax

From £25.92

£11.95

Saga

£0

£11.50

£9.75 (when you make 10 or more trades per quarter)

iWeb

£0

£10

To join JPJShare.com NOW, visit www.jpjshare.com and begin benefitting from our low prices! Or for more information, call us on 01624 641301

Risk Warning - The value of investments can go down as well as up. The past is not necessarily a guide to future performance and investing in shares could lose you all or part of your capital. The difference between the buy share price and the sell share price for smaller company shares can be significant. Profits from dealing in shares may be liable to tax - the level of tax and bases of relief from tax are subject to change. JPJShare.com offers an execution-only stockbroking service and does not offer any advice on the suitability of investments. If you are in any doubt about the suitability of a particular investment with regards to your individual circumstances, you should consult an independent financial adviser. JPJShare.com is a trading name of Rivington Street Stockbrokers Limited, an Isle of Man Company licensed by the Isle of Man Financial Supervision Commission and regulated in accordance with Manx Law. Registered Office: 18 Athol Street, Douglas, Isle of Man IM1 1JA. The rules made under the Financial Services and Markets Act (FSMA) for the protection of retail clients do not apply because the Isle of Man has its own system of regulation, to which Rivington Street Stockbrokers Limited is subject. Consequently, the Financial Services Compensation Scheme established under the FSMA is not available. This financial promotion has been approved for FSMA Section 21 purposes by Rivington Street Corporate Finance Limited which is authorised and regulated by the Financial Services Authority and is a wholly owned subsidiary of Rivington Street Holdings Plc. Full details of the Isle of Man’s regulatory system may be found at www.fsc.gov.im. The ISA manager for the JPJShare.com Self Select Stocks & Shares ISA is SMARTfund Administration Limited incorporated in England and Wales with company number 06016828 whose registered office is: 6th Floor, 6 Broad Street Place, London EC2M 7JH. SMARTfund Administration Limited is authorised and regulated by the Financial Services Authority.

THE CLOSE | INFORMATION

WHO’S WHO Whether you’re new to financial markets or just looking for a better deal, The Exchange has all the info you need. By Toby Anderson

ETX CAPITAL ETX Capital is the trading name of Monecor (London) Limited. The company joined interdealer broker Tradition in 2000 and in 2002 Monecor became the retail derivatives arm of Tradition. In 2007 Robin Houldsworth and Peter Shalson acquired Monecor for an undisclosed sum from Tradition UK. The name ETX Capital was adopted in 2008. What’s their pitch? ETX Capital provides institutional, high net-worth and retail customers with multi-asset dealing capability through contracts for difference and financial spread betting products. It seeks to offer high levels of customer support and guarantees total client confidentiality. ETX offers spreads from just 1 point and margins from 1%. Anything for newbies? ETX Capital provides up to £250 cover if the client is not in pro to within the first 10 days of trading. Contact www.etxcapital.com 020 7392 1430

PROSPREADS ProSpreads is a Gibraltarincorporated division of London Capital Group. What’s their pitch? ProSpreads’ advanced trading technology provides the same functionality as direct market access, delivering execution in a fraction of a second, extremely

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tight spreads and no re-quotes. It offers speculators a unique trading platform with direct market access functionality to trade the major indices, commodities and currencies. Anything for newbies? Clients can open an account with £1,000 and take advantage of the same technology used by direct market access brokers and futures traders. Account holders have access to a complete package of trading tools and a number of education options, including a demo account allowing them to test trading strategies. Contact www.prospreads.com 0800 804 8772

GEKKO GLOBAL MARKETS Used to be known as VDM, the company now styles itself Gekko Global. We are not sure quite why. Users rate the speed of execution and the simple-to-use platform. What’s their pitch? They claim to have highly competitive spreads (1 point on the UK 100 through the day and up to 8pm), low initial deposits, low minimum trade sizes, a userfriendly platform, free guaranteed stops and cutting edge technical research. All of which ticks a lot of boxes for us. Anything for newbies? You bet. A cash bonus of 25% of your initial stake up to a maximum matched amount of £500. That’s the most generous offer out there. Contact www.ggmarkets.com

020 3326 2131

CANTOR INDEX Cantor Index is a financial spread betting company, established in 2000. Part of the global Cantor Fitzgerald group, Cantor Index is open 24 hours a day, and offers bets on a wide range of markets from shares and indices to bonds and commodities. What’s their pitch? Cantor Index has a comprehensive data service which allows clients access to detailed market reports as well as news from third-party sources, and state-of-the-art stock screening tools. With specialised forex and commodity pages, as well as an economic and company diary, the data service has detailed financial information available free to all account holders. Anything for newbies? Cantor Index offers new clients a £50 account opening bonus. To qualify for the offer clients simply have to fund at least £250 and have placed a minimum of two non-equity bets (each with a stake of at least £2 per point) within 1 month of account opening. The offer is available until the 30th November 2010. Contact www.cantorindex.co.uk 0207 894 8040

PAN INDEX Pan Index was established in Ireland in 2001 and focuses

predominantly on China but also retains operations in Europe. What’s their pitch? Pan Index seeks to offer clients secure online access to trade on stock indices, forex and commodities, with competitive spreads and low margin requirements. The company has a multi-lingual customer service team that operates 24 hours a day. It offers streamed spread trading news, analysis and professional charting, giving clients continuous access to up to date market information. Anything for newbies? Compared with many, Pan’s front end is easy to use and negotiate – important for beginners. Contact www.panindex.com +353 1855 9404

SPREAD CO The Spread Co group of companies, with offices in London and Singapore, is a specialist provider of retail derivative trading products worldwide. It provides the facility to bet on CFDs, forex and the usual range of spreads. What’s their pitch? “The Spread Co trading platform is the simplest and most userfriendly CFD platform I’ve seen,” says Alpesh Patel, a professional trader. Anything for newbies? A new account funded with £300 or more allows the client, once having placed four qualifying trades, the opportunity to take on Head Trader Rajesh Patel in a one day, head to- head challenge. If the client beats him, Spread Co will double the client’s profit by

THE CLOSE | INFORMATION

SPREAD BETTING

up to £150. If the client happens to lose on the trade, but still fares better than the trader, the company will refund losses on that trade up to £150. Contact www.spreadco.com 01923 832 682

FINOTEC Offering forex, commodities and CFD trading, Finotec serves serious retail as well as institutional clients. The minimum contract sizes on forex, for example, underline that this is a site for the more committed trader. What’s their pitch? The Finotec Trading Platform offers one of the most diversified range of products in the industry, including currencies (at least 32 pairs), options, commodities and CFDs on all major indices. New products are regularly added and the platform is regularly upgraded. The level of trading capital and volume generated through Finotec allows it to negotiate inter-bank conditions with liquidity providers. Forex can be traded with margin requirements of up to 0.5%, and up to 5% for CFDs – among the lowest available in the market. Anything for newbies? The Finotec Demo Account enables clients to simulate trades and spread bets in real market conditions. Clients can trade with $100,000 in virtual money and learn how to use trading tools and real-time charts. Contact

FOREX

www.finotec.com 0207 398 0170

WORLDSPREADS WorldSpreads was founded in 2000. It offers a range of services to retail clients, specifically spread trading and CFDs. The WorldSpreads head office is in Dublin, and it has offices in London, Paris, Frankfurt, Stockholm, Copenhagen, Madrid and Kuala Lumpur What’s their pitch? WorldSpreads offers zero – you read it right, zero – spread on a range of 10 instruments with plans to bring more on stream. It aims to provide high quality financial trading services to a global audience. Services offered include trading of contracts for difference and spread betting. Anything for newbies? Clients opening new accounts with a minimum deposit of £500 can receive up to £300 in cash back against realised losses. Good deal. Contact www.worldspreads.com 0207 398 5220

ODL Markets / FXCM Originally founded in 1994 as an options house, ODL Securities was bought by FXCM Holdings LLC. It has 200,000 live trading accounts and over 700 employees worldwide. Voted Best Retail Platform by FX Week last year. What’s their pitch? ODL allows clients to spread bet on forex, oil, gold and global

CFDs

stock indexes. Functionality is a strong suit; you can trade in one click, and direct from the chart you’re looking at. The software works on all manner of smart phones and mobile devices. Anything for newbies? ODL requires a minimum deposit of £300 for all new accounts. Also, should everything go south, there’s a no-debit deposit guarantee, so you can’t lose more than your deposit. Contact www.odlmarkets.com 0207 903 6550

MF GLOBAL SPREADS MF Global Spreads provides the opportunity to trade in forex, futures and options and to spread bet. What’s their pitch? MF Global Spaces offers news and views throughout the day as a guide to the client’s trading decisions. Clients are able to monitor the markets and stocks they want by creating watchlists in My Markets. Subscribers to MF’s My Markets Product will soon be able to access content via iPhone or other mobile devices. Anything for newbies? New clients will be given a £2 free FTSE index bet with a 1-point spread, a year’s free access to technical analysis worth £300 and access to a special discount book club. Contact www.mfglobalmarkets.com 0207 144 5678

FUTURES

DELTA INDEX Delta Index was founded in 2001 by Joint Managing Directors Conor O’Neill and Technology Specialist Micheal O’Shea. The team is led by non-executive Chairman, Dermot O’Donoghue, former Head of Treasury at AIB. What’s their pitch? Delta Index seeks to provide transparent and tight pricing throughout its range of markets, whether trading through its online trading platform XDeal or speaking to its traders over the phone. Clients can trade commodities, shares, forex and indexes. “Where the traders trade” is their tagline. Anything for newbies? The offer of one-on-one training beats anything the rest of the pack offers, like videos or tutorials. You can also sign up for the Trading Ideas service which will send you info like buy and sell signals. Contact www.deltaindex.com +353 1 664 8500

SPREADEX Spreadex was formed in 1999 by former City dealer Jonathan Hufford who was hooked on the sheer fun offered by spread betting and decided to set up his own company to make spread betting more accessible and user-friendly. What’s their pitch? Spreadex offers leveraged access to trade on a huge range of global financial markets including

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THE CLOSE | INFORMATION

indices, shares, commodities, currencies, interest rates, bonds and exchange traded funds all via a professional yet simple-to-use trading platform. The firm offers a full suite of charting tools, tailored phone trading service, some of the most attractive margin rates in the industry and also provides credit, subject to client status. On the sports side of the business, Spreadex offers thousands of sports spreads and fixed odds prices on a range of sporting events with hundreds of markets offered in-play, all from one platform. Anything for newbies? New customers at Spreadex can qualify for up to £400 in offers and once signed up they can receive £50 for every friend they refer to Spreadex. On the financial platform, new clients can gain up to £200 cashback on net losses on trades in the first two weeks providing a minimum of five opening trades have been placed in that time. There are sports deals too. Contact www.spreadex.com 08000 526 570

ShortsandLongs.com ShortsandLongs.com is an arm of Spreadex Ltd and was formed in October 2008 as a unique alternative from the existing spread betting firms. The aim was to make trading cheap, simple and hassle-free while also offering spread bettors much greater risk-control. What’s their pitch? ShortsandLongs.com has some

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of the tightest spreads in the industry on key markets such as the UK 100 daily, Wall Street daily, gold, light and Brent crude and major spot currency pairs. It also offers a further weekly half-price spread reduction on its most popular markets and provides guaranteed stop losses completely free of charge on every trade. Coupled with a full charting package and fast and easy to follow trading platform with no re-quotes, ShortsandLongs.com is the ideal choice for either the novice spread bettor or for day traders who wish to be in complete control over their positions. Anything for newbies? New customers can enjoy £100 of risk-free trading in their first 14 days with ShortsandLongs. com. Provided they have placed a minimum of two opening trades, any net losses in that period will be refunded up to a maximum of £100. Contact www.shortsandlongs.com 01727 895 140

CMC MARKETS CMC Markets started when Peter Cruddas put £10,000 into a firm he called Currency Management Corporation. In 1996 he launched the world’s first online forex trading platform, from where CMC Markets has evolved to become one of the largest financial spread betting companies, with over 26 million trades executed annually. What’s their pitch? CMC says it wants to become the world’s leading online retail

financial services business, constantly innovating to differentiate its content, services and products. “You bet in pounds sterling and you can keep your bets open as long as you like,” the company says. Anything for newbies? CMC provides demo accounts and the front-end is going to look familiar to anyone who’s done a lot of video gaming. That said, if you haven’t, it still looks slick and is easy to drive. There’s also a handy ‘Insights’ section which tells you essential trading details but also tells you what influences price and there’s a news feed too. Contact www.cmcmarkets.co.uk 0207 170 8201

INTERTRADER InterTrader.com says its aims are simple: to make the markets accessible to all, to make trading affordable and to provide a service that the client can trust. InterTrader.com is a trading name of London Capital Group. What’s their pitch? Clients can take their own positions on global markets. InterTrader.com covers a variety of markets from stock indices and FX to commodities, oil and metals to UK, US and international equities. Anything for newbies? InterTrader’s cash loyalty programme allows clients to receive a monthly rebate on trading costs of up to 10%, dependent upon the volume of trades. Also, sign up before the end of the year

and they’ll add 10% to your starting deposit, up to £500. Contact www.intertrader.com 0207 456 7677

CITYINDEX City Index was established in the UK in 1983 and is part of IPGL – a privately owned company with substantial shareholdings in the derivatives broker ICAP plc. The company has over 600 employees worldwide and offices in the UK, US, Poland, Singapore, China and Australia. It transacts in excess of 1.5 million trades every month for individuals in over 50 countries worldwide. What’s their pitch? CityIndex says it seeks to provide consistently competitive spreads (like 1 point on the FTSE) and margin access on thousands of markets worldwide including indices, shares, currencies, commodities, bonds, interest rates and more. Award winning mobile platform. Anything for newbies? There’s a four-week ‘Learn to Trade’ program where you can trade lower-than-normal value bets to get your eye in, like 25p per point on spreads. Contact www.cityindex.co.uk 0207 550 8500

FINSPREADS Finspreads offers access to thousands of instruments on the world’s financial markets. It claims to have pioneered fully interactive

THE CLOSE | INFORMATION

online spread betting in 1999. It is part of the City Index group. What’s their pitch? Finspreads sells itself on transparent and fair prices. It publishes the size in which it is prepared to deal at its quoted price, meaning what you see is what you get. Anything for newbies? New account holders are offered up to £100 in trading credit and while you’re learning the ropes you can trade as little as 10p per point for the first eight weeks of your account. After that, trades start as low as 50p per point. Contact www.finspreads.com 0207 150 0400

GFT UK GLOBAL MARKETS GFT Global Markets is a whollyowned subsidiary of the US forex and futures dealing firm Global Futures & Forex and a sister company to worldleading online forex dealing firm Global Forex Trading. What’s their pitch? GFT’s trading software, DealBook 360, is capable of handling virtually any kind of order. Except your lunch. DealBook is a software platform that streams data direct from the dealing desk to the client, allowing them to operate using the most up to date prices. Anything for newbies? GFT offers a 5% deposit matching scheme for all of its new spread betting customers, hoping to draw even more attention to the potential tax benefits offered to investors by way of spread betting.

Contact www.gftuk.com 0207 170 0770

IG INDEX IG Index was initially established to give investors the opportunity to bet on movements in the price of gold, without having to actually buy or sell the physical commodity in the market. When founder Stuart Wheeler hit upon the idea of trading the price of gold as an index, IG Index was born, laying the groundwork for financial spread betting as it is now known in the UK. The IG Group has over 120,000 clients worldwide, making more than four million transactions per month. What’s their pitch? IG Index has been responsible for pioneering several types of financial spread betting products, including the innovative Binary and Bungee Bets, which offer clients yes/no and bounceback propositions. All this is available on its PureDeal trading platform which features Price Improvement technology and one-click dealing. There’s a mobile phone platform too. Anything for newbies? IG offers two types of account: the Limited Risk Account will cost a few points in terms of the spread, but it means you’ll have risk management in place and won’t lose more than your deposit. The Plus Account has tighter spreads and options on order types including Limited Risk orders and Trailing Stops.

Contact www.igindex.co.uk 0207 896 0011

PADDY POWER Paddy Power Trader is a unit of the ever-popular bookmakers. Incidentally, there was no Paddy Power; the name comes from a result of the merger between three bookmakers, none of whom was called Paddy. What’s their pitch? PPT aims to be the best value offer in the market with, for example, just a two-point spread on cable. There is a strong analyst and recommendations offering, with targets and suggested stop-losses. There’s a useful long/ short percentage indicator so you can see what your fellow PP traders think about various bets. Anything for newbies? Deposit £200, trade four times, and they’ll top you up by £100. In addition there is the usual suite of seminars and online help videos. Contact www.paddypowertrader.com 0207 456 7041

CAPITAL SPREADS Capital Spreads is another division of London Capital Group, providing the expectation of a solid platform and financial stability to the CS offer. What’s their pitch? Capital Spreads allows clients to trade in many financial products using one of the several major currencies from one platform. It also offers a limited margin policy, where clients are required

to deposit only the maximum value of their stop-loss (plus 20%). This means that large sums of capital are not tied up funding the spread betting account. It also says it offers ‘extremely’ tight spreads and offers them for far longer than many of its competitors. Anything for newbies? A nice interactive tutorial, and a load of other learning tools: ‘take a tour’, user manual, FAQs section, free seminars plus the usual practice account stuffed with 10,000 practice pounds. Contact www.capitalspreads.com 0207 456 7020

TRADEFAIR Linked to the phenomenally successful Betfair, Tradefair offers a wide variety of markets. The no-nonsense interface offers customers thousands of financial instruments with some of the tightest spreads on one of the most reliable spread betting platforms. What’s their pitch? Simple but sophisticated frontend with low spreads. Nothing much new there. The USP here is Autochartist, which can send signals about significant potential trading triggers as well as allow you to customise your own charts. Anything for newbies? Free subscription to info service ADVFN, plus £100 matching when you deposit and make a few trades. Contact www.tradefair.com 020 7456 7071

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TRADING GLOSSARY Welcome to The Exchange financial glossary. We’ll be updating every month and we welcome additions (decent and clean, please) – bottle of champagne for each issue’s best suggestion. contact@theexchangemagazine.com

ABS Asset-backedsecurities; ie. securitiesbacked by mortgage loansor suchlike which areobtainable if the creditor defaults. ACTUALS The physical assets behind commodity securities. ADR American Depositary Receipt. These are sharesof foreign companies listedon exchanges in the US. ALEXANDER’S FILTER A method that measures the rise or fallof a share price in percentageterms over a given period. Afast rate of increase suggestsa buy; the reverse, a sell. AMERICAN OPTION Can be exercised at any time during thelife of the contract. Europeanoptions, by contrast must beexercised on the expiry date. ARBITRAGE The action of profiting from the differencein price for similar securitiesin different markets.

BACK MONTH The traded future or option that is due to expire latest.

BACKWARDATION A situation within futures markets wherethe cash price is greater than the price for future delivery.Such a scenario often occurs when supply of a particular commodity is short but the futuresprice remains low because the expectation remains that further supply will come online in the near future. See Contango. BEAR An investor who is essentially pessimistic about the fundamentals of a given market. So called because a bear fights on its hind legs, moving its paws in a downward motion. BEAR RAID The attempt to push down the price of a security, most often by SHORT

96 | THE EXCHANGE | July 2011

SELLING. BEAR TRAP The belief that the market will start to fall having risen significantly, there by leaving short sellers trapped by increasing prices, forcing them to cover their positions by buying stock at higher prices. BED AND BREAKFAST DEAL A transaction where by stock is sold and subsequently bought back after the end of the tax year, allowing shareholders to register either or a loss or a profit for tax purposes. BELLS AND WHISTLES Feature sadded to a security put up for sale to attract investors or reduce the costs assumed by the issuer. BID/ASK SPREAD The difference between the price at which adealer is prepared to buy and the price at which they will sell. The spread between the best bid and the best ask (or offer) is sometimes known as the touch. BLUE CHIP COMPANY A long-established company with a long and strong record of profitability and endurance. The term is taken from the most expensive chip on a poker table. BOTTOM FISHING The practice of buying shares when they lie at a level the investor believes is unlikely to decline further. The same term is also used with respect to companies buying competitors that are cheap or failing. BOTTOM UP An investment strategy whereby investors pick stocks, rather than rely upon achieving a balanced weighting in each sector. Such a strategy is based upon the management of individual companies rather than market or economic trends. The opposite of Top Down. BUCKET SHOP A brokerage, often from overseas, that sells shares with little underlying value at, by definition, elevated prices.

BUFFER STOCK A stockof commodities held by an international entity, which seeks to buy and sell from its stockpile as a means of maintaining price stability. BULL An investor who believes that the market will rise. So called because the raising ofthe head (denoting a command to buy a security) is redolent of the action of a bull raising its horns before attacking. BULL MARKET A market where prices have risen significantly over a prolonged period of time.

CALL An option giving the holder the right to buy an instrument for a particular price within a set time.

CALLABLE Callable bonds give an investor the right to redemption at a set price on a set date. CIRCUIT BREAKERS When an exchange imposes the closure of trading after prices have fallen by a certain percentage- a move designed to restrict so-called panic selling. COCKTAIL SWAP A mixture of different kinds of swaps. Often used to spread risk on large deals. CONTANGO A situation in which futures prices rise progressively as the maturity date moves further away from spot. The increase reflects the addedcost of storage and insurance for commodities. Contango isthe opposite of backwardation and is the normal relationship between spot and future prices. CREDIT RATING The assumed creditworthiness of a company or sovereign nation issuing debt securities and their ability to repay the investor. Credit ratings affect the ability of a government or company to secure financing from banks and also inform the price their securities might command on the open market.

DEAD CAT BOUNCE A rise in a security or broader market following a sustained drop, followed by another precipitous drop due to a lack of change in the fundamentals of said financial instrument or market. DISCOUNT A derivative that is trading below the current market price it is said to be trading at a discount. DOUBLE DIP A second drop in a market or economy after significantly dropping for first time. DUTCH AUCTION An auction in which the price is gradually lowered until a bid is secured. That bid then becomes the price at which the offering - such as US Treasury Bills - is then sold. The term is often synonymous with tenders.

E F

EXPIRY DATE The date at which a security matures. It can no longer be traded thereafter. FAIR VALUE The priceat which a security canbe expected to trade.

FALLEN ANGELS Bonds that have fallen below a previously held investment grade, becoming junk. FIBONACCI NUMBERS A mathematical phenomenon described by 13th century mathematician Leonardo Fibonacci, whereby the sum of any two consecutive numbers equals the next highest number. The system is used by technical analysts to establish price objectives. FILL OR KILL An order to buy or sell stock at the particular moment that a security reaches a certain price. FOKs are usually initiated when an investor wants to buy a large chunk of stock at a particular price.

THE CLOSE | INFORMATION

FRONT RUNNING 1) The practice whereby a trader illegally deals on his own behalf prior to carrying out a client’s order to buy or sell a specific security when he knows the client’s transaction will likely move the price. 2) A brokerage’s trading in shares ahead of publication of its own research report.

GFD A term signifying that an order can only be filled on the day it islodged and will expire at the close of business. GUARANTEED ORDER An order that limits losses to anamount specified both duringand outside office hours.

HAIRCUT The difference in price between market value and the value o fthe collateral used in repurchasing agreements. (see repurchasing agreements) HEDGE FUND An investment fund, usually only open to wealthy clients, that seeks to produce high returns from short-term markets. They use a broad range of strategies but aim absolute returns, rather than returns benchmarked to an index or asset class. HEDGING A strategy whereby investors seek to minimize risk. Hedging often involves buyingassets in one market to offset potential losses in another. HIT Jargon for the acceptance ofan offer to buy or sell a security.

IN THE MONEY A term used to describe an option when the current price for the underlying security is above the exercise for price for a call and below the price for the exercise for a put.

K L

KERB MARKET A term applied to trading outside official market hours. LIBOR London inter bank offer rate.

LIMIT UP/LIMIT DOWN When an exchange imposes either a floor ora ceiling on a security price, closes or suspends trading in order to

prevent extreme changes in price.

MARGIN The use of a margin allows an investor or a spreadbetter to trade without them being in full possession of the necessary funds. The margin is the part payment of costs to cover contractual obligations, thereby protecting the investor or better against unlimited losses. MARGIN CALL The call made by a spread betting company to a client whose account has fallen below the minimum requirement. MARGIN TRADING A process that allows investors to borrow funds from a brokerage at a particularrate of interest. The added gearing will however cost the investor more money should the market move in the opposite direction tothe way they had anticipated.

OUT OF THE MONEY When the current market price of an instrument underlying an option is below the exerciseprice for an option to buy and abovethe price for an option to sell.PPUMP AND DUMP A formof fraud whereby falselyoptimistic about a company’searnings are circulated aheadof their official publication with aview to pushing up the share price.PUT/CALL RATIO The ratio of thenumber of options to sell traded inrelation to the number of options traded to buy. The number is viewed as a gauge of market sentiment.

RED HERRING A term used for preliminary prospect uses for a new issue used to measure market sentiment for the in the security. The keyfigures on such an announcement, such as the profit forecast, will always be deliberately left blank. REVERSAL DAY A term used to describe the day on which a security makes a significant change of direction in terms of its price. The term is not applied until the security has made a significant change in the opposite direction to the previous trend. RSI Relative strength indicator. A technical indicator (see page 38) based on the momentum of prices in a preceding 14-period block. A reading above 70 (out of 100) is classed as ‘overbought’; a reading below 30 is deemed oversold. RESISTANCE The price level at which a security

or index will tend not to rise above, either for technical reasons regarding the price or psychological ones, for example gold rising above $2000 per ounce.

SCALPERS Futures andoptions traders who switch their positions within a very short time in order to make money from small gains frequently. SHORT SELLING A transaction whereby an investor borrows stock from a shareholder for a fee and with a guarantee to return theequity at an agreed later date. In theory, the borrower is anticipating a decline in the share price, which will allow them to benefit from the differential between the price at which they sell the borrowed stock and the price at which they repurchase it. For spreadbetters, it is selling the hope that the stock will decline. The trade is then closed by buying – the‘long’ – to balance the book. SPOT The price of a security for immediate delivery. This is usually executed two days after the trade. SQUEEZE A short squeeze happens when investors buy shares to cover short positions. The term is also used when a particular commodity is in tight supply. STOP LOSS The level below the purchase price at which a spread better automatically closes their position. STOP ORDER The instruction to buy or sell below the current price of the financial instrument in question. STRADDLE An options trading strategy whereby the investor buys one call and one put option with the same execution and expiry date. This allows the buyer to take advantage of price movement in both directions. STRANGLE An options investment strategy, whereby the investor purchases a call and a put option with different strike levels but the same expiry date. The investor will then make a profit if prices break above a set range. The strategy is basically a bet on volatility. STRIKE PRICE The agreed price atwhich an option can be exercised.

SUPPORT The price level at whicha security or index will tend not to fall below, either for technical reasons regarding the price or psychological ones, for example gold falling below $1000 per ounce. SWAP A security, agreed between two parties, that seeks to offsetinterest rate or currency fluctuationsto match the parties’ assets to their liabilities. The security is basedupon cash flow rather than the underlying amount of fixed debt. SWAP SPREAD The difference between a swap interest rateand the benchmark government bond yield at the set maturity.

TOP DOWN An investment strategy whereby the investor seeks a balance by buying stocks in particular sectors. Such a strategy is basedupon historical and forecasted economic and market trends. TRIPLE WITCHING A quarterly event whereby stock index futures, stock index options and options of individual stocks expire. The event usually results in increased market volatility.

UP AND IN An option that is triggered when the price of the underlying security reaches a set level. The reverse of this isknown as Up and Out.

VANILLA BOND A bond with no unusual features. Such paper pays a fixed rate of interest and is redeemable upon maturity. VARIATION MARGIN The amount of money owed by a spread better when holding open positions and they are in a negative position. VARIABLE REDEMPTION BOND A bond, the redemption value of which is determined by a variable such as the exchange rate between two different currencies or perhaps the performance of a stock index.

W/I When issued.Trading in bonds can start in the so-called grey market as soon as the formal announcement of their issuance has been made but before they are delivered. Thisis also known as free to trade.

July 2011 | THE EXCHANGE | 97

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