Online trading and derivatives company London Capital Group bounced back from a somewhat difficult 2010, with market turbulence having helped the financial spread betting and CFDs provider post record trade volumes in the second half of the year and a 9% increase in underlying full-year operating profit.

Financial Highlights

• Revenue increased 13% to £39.0m (2010: £34.5m).
• Adjusted profit before tax* increased 9% to £7.1m (2010: £6.5m).
• Volatility in H2 led to record trade volumes and increased revenue.
• Statutory profit before tax of £6.1m (2010: loss of £56k).
• Net cash and short term receivables of £25.1m at year end (2010: £13.9m).

Operational Highlights

Strong UK financial spread betting (“FSB”) performance.

• Average revenue per user (“ARPU”) increased 7% to £1,370 (2010: £1,279) for the year.
• FSB average trades per day increased 11% to 33,042 (2010: 29,832).
• New client acquisition totalled 10,398 (2010: 12,036).

LCG’s spread betting division which operates the company’s flagship Capital Spreads brand remains the largest revenue earner to the Group at 68% however the percentage contribution to overall revenue has decreased from 2010 due to the significant revenue growth seen in all other divisions. Pretax profits for the year ending December 2011 amounted to 7.1 million pounds from 6.5 million a year earlier.

Average trades per day rose 11% throughout the year to just over 33,000, buoyed by the addition of 10,398 new clients in the period – despite aggressive competition by rivals – and the group made more revenue per client, too; up 7% to £1,370.

Commenting on the results, Simon Denham, CEO of London Capital Group, stated: ‘Despite a difficult start to 2011 the Group has delivered a strong set of results and made positive inroads operationally and financially. We are particularly delighted to have improved our scalability, competitive position and to have developed our international operations further. Whilst the uncertain economic outlook both in the Eurozone and UK presents a challenging backdrop we are confident in the robustness of our business model and our future growth plans.’

During the year London Capital Group launched a number of new applications including new charting functionality, multilingual platforms and an Android Mobile trading platform.

Simon Denham notes that the group is now geared for international expansion, which has fuelled growth at larger rivals such as IG Index and CMC. The Australian operational division setup in 2010 is expected to breakeven later this year, too, and will provide a base for expansion into South East Asia – as well as providing the opportunity to sign more white-label deals with trading and gaming partners in the region.

The FSA has filed an interim injunction at the High Court against Mr Stuart Carl Mudge and Mr Anthony John Lewis in respect to their alleged involvement in the Churchgate Trading Syndicate.

The UK regulator is alleging that Mudge and Lewis, either personally or trading as the Churchgate Trading Syndicate had willingly accepted £5 million from investors in the United Kingdom ‘by promising a guaranteed return generated by trading in spread betting’ since September 2010.

The injunction blocks Mudge and Lewis from accepting further business into the company or transacting any new trades on behalf of the syndicate. The duo have also had assets belonging to them frozen.

The FSA expressed concern that Mr Mudge and Mr Lewis may have been engaging in these highly speculative activity without the necessary permits from the FSA.

In a statement, the regulator says: ‘The FSA is concerned that Mudge and Lewis may have been engaging in these activities without the necessary approval from the FSA.’

‘By not having the necessary approval by the Financial Services Authority, investor funds may have been put at risk as investors may not claim compensation from the Financial Services Compensation Scheme or make a complaint to the Financial Ombudsman Service.’

Reportedly, just yesterday the watchdog slapped Santander with a £1.5 million fine for failings in relation to the sale of its structured products. The Financial Services Authority is continuing with its investigation.

Following the collapse of brokerage firm MF Global and the subsequent news that administrators KPMG had found Cash for Clients of MF Global, we now know that as part of the winding down process the UK client list of MF Global has been passed on to a former rival spread betting form: Spreadex.

Many UK clients of MF Global will have discovered this upon receiving an email from Spreadex two weeks ago; an email which apparently contained the clients’ non-defunct MF Global account numbers. This may have come as a relief (or sorts) for those customers who were hoping for some kind of continuity of service, while others were left feeling hopping mad that their personal details could be bandied between two different companies without their prior consent. Either way, we assume that the “cash for clients” paid by Spreadex will have helped the administrators to plug a few financial holes.

It’s not unusual for a company to buy the client list — but not the financial obligations — of a different failed enterprise, and for the terms and conditions of the original company to state this possibility. MF Global clients accepted that their details may be transferred to a third party as a consequence of paragraph 27 of the MF Global retail terms of business: “Your Personal Information”. According to sources, this transfer of information does not breach the Data Protection Act.

The bottom line is that while this transfer may provide a degree of continuity for some clients, there is no obligation to keep the new SpreadEx account — just call them to close it. In any case, the degree of continuity is limited by the fact that clients still need to pursue any claims with the administrators (KPMG) of the original account providers (MF Global) because SpreadEx have taken on the client database but not the financial obligations.

I don’t remember receiving an email about this, like I did about the switch by Delta Index to the Gekko Global Markets spread betting platform, but I got a call yesterday from a pleasant lady at Cantor Index to tell me about the new trading platform they had been working on. She offered to send me an email, and all I had to do in order to enjoy the new platform experience was reply to say that I accepted the new terms and conditions.

In the interests of financial journalism — i.e. having something to report on — I went ahead and made the switch without really giving it too much thought, but my account with them was a relatively small “stand-by” account to which no real harm could be done.

Within minutes I received a succession of emails documenting the fact that my cash and open positions had been transferred to the “new account” (so not just an update to their trading platform software then) which could be accessed via a new web site at www.cantorcapital.com rather than the usual www.cantorindex.com. The “capital” part of the new web address sounds familiar, and the new platform bears more than a passing resemblance to the ETX Capital platform which itself bears a resemblance to the Capital Spreads and Tradefair platforms provided by the London Capital Group.

At first glance I’m quite pleased about this, because I never much liked the original Cantor Index trading interface whereas I do like those of the other providers just mentioned.

A Cursory Examination of Features

I’ve not yet used the new platform in anger (I never trade when I’m angry) but I have taken a whistle-stop tour of the platform.

I discovered that the range of markets — at least in terms of individual equities — had not improved much if at all from the limited set that were offered on the original Cantor Index platform. For example, I can’t locate Aminex plc on this platform whereas it is available to trade on Capital Spreads, Tradefair, WorldSpreads, IG index and possibly even on ETX Capital. Stick to more mainstream markets and you’ll be alright.

Whereas the Tradefair, World Spreads and IG Index platforms show the stop level against each open position, the new Cantor Capital platform obliges you to review stop orders in a separate Order Book tab… just like on the Capital Spreads and ETX Capital platforms.

I’m not being negative here, but merely descriptive, and I do like the new trade and order tickets that make it very logical to specify stop levels (including guaranteed, but apparently not trailing) and limits.

Charts appear to be the capable it-finance.com charts that were the staple of so many other spread betting platforms until (for example) ETX Capital introduced their Trade through Charts

Facebook’s upcoming IPO is causing some excitement in IG Index and Spreadex‘s grey market trading after the spread betting providers started a market in the stock.

Facebook is readying to go public following the floating of technology companies LinkedIn and Groupon. In particular Spreadex has started quoting a market allowing spread traders to trade on the percentage change of Facebook’s stock on its first day’s trading. A grey market is about trading in the stock of a company in advance of the actual float or after suspension.

Spreadex spokesman Andy MacKenzie noted that the market is attracting substantial popularity amongst its client base with a heavy bias towards buying which has pushed Spreadex’s spread up from 50%-55% to 60%-65%.

‘Spreadex clients are expecting Facebook to follow in the footsteps of LinkedIn which floated at $45 and closed the first day up 109% at $94.25.’

‘However, it would be wise to remember that Groupon closed its first day up 31% closing at $26.11 after it floated at $20 and Zygna was actually down 5% on its first day, closing at $9.50 after floating at $10.’

Financial spread betting allows speculators to buy (aka go long) or sell (aka go short) a company’s share price and seek to profit from either a rise or fall in the underlying value of the stock. However, Spreadex’s Facebook market is based on the percentage change from the initial public offering (IPO) price to the closing price on its first day on the open market.

Once the float is complete, Facebook stock will then be quoted regularly at www.spreadex.com in the conventional manner alongside thousands of other global equities.

Spreadex’s example trades on the Facebook first day of trading percentage change.

Buy spreadbet example: You believe Facebook shares will rise sharply and decide to buy at 65. Demand for the social network is bigger than the Zuckerberg bank balance and Facebook’s stock price ends the day up 86%. You win 21 multiplied by your stake (86-65). However, in the scenario that Facebook closes the day 25% up you would stand to lose 40 multiple by your stake (25-65).

Sell spreadbet example: Not believing the hype you sell at 60 and are proved right when they finish the day friendless, down 6% from the IPO price. In this case you would win 66 times your stake (60 – - 6). If shares closed up 86% as per the above example, you would stand to lose 26 times your stake (60-86).

Meanwhile, Facebook’s equity value reached $118bn in IG Index’s grey market trading after the London listed spread betting provider started a market in the stock. IG’s quote is based on the market capitalisation value at the end of the first day’s trading and will be rounded to the nearest billion dollars. If the IPO doesn’t happen by the 31st of December 2012, all open spread betting positions will be voided.

According to IG Index’s chief market strategist David Jones: ‘We had lots of buyers coming in – at one point the market cap was pushed as high as $123bn. It’s clear the view of our clients is pretty bullish.’

IG Index has launched a new major advertising marketing campaign designed by the company’s in-house team to promote the financial spread betting company.

The campaign starts today and the timing corresponds with IG’s release of IG Insight, a new market data, live news and expert analysis portal which keeps track of client sentiment and dealing trends across IG Index’s active client base.

Ali Hine, director of marketing at IG Index remarked that IG keeps building on its continued growth in new account openings and active client levels in the United Kingdom. He said that the campaign is aimed at individual who understand how spread betting works but haven’t yet discovered the IG experience.

The advertising campaign is targeted at commuters at London’s Waterloo and Bank stations with travelator, in-car panels as well as a giant wall site, and the message will be enforced by adverts in City AM, Evening Standard, The Times, The Telegraph, Moneyweek and Investors Chronicle. Media buying for the campaign was handled by Mediacom and MPG.

Advertising online media will take the form of contextual and behavioural targeting, including in-app advertising on Bloomberg, as well as HTML 5 banners and activity of Facebook, Twitter and Linked In.

Irish based spread betting provider MarketSpreads is suing former company executives Brian O’Neill and Fergus Rice for an amount equivalent to €1.4 million that they routed from the enterprise to another company in which they were involved.

It is understood that MarketSpreads is seeking summary judgement for €1.4 million plus interest, a total of €1.7 million against former CEO Mr O’Neill, of The Copse, Beresford, Dublin, and ex-executive director Mr Rice, of Pembroke Road, Dublin. The executives parted ways with the company around the middle of 2011. It emerged that towards the end of 2010 and early in 2011 the MarketSpreads board found out that advances, amounting to €1.4 million, had been made to Sports Spread Betting Ireland, a company in which Mr Rice owns a 60% stake and in which Mr O’Neill is also involved. The court heard yesterday that both Mr O’Neill and Mr Rice understand and accept that they are personally responsible for the monies. Meanwhile, the Central Bank was notified of the situation.

Statements in writing show that last June both Mr O’Neill and Mr Rice agreed to pay the money due, which was considered as a loan, plus any outstanding interest. Both executives resigned from MarketSpreads just after and agreed to sell their stock in the company’s parent company to speed the repayment of the monies. In October the company sent a letter to both men notifying them that the sum due amounted to €1.7 million. The letters warned that the company will start proceedings if the amount wasn’t paid in full within 7 days.

Meanwhile, Mr Rice informed the court yesterday that he disagreed that he owed €1.7 million, and stated that the liability should be divided between himself and Mr O’Neill. Mr O’Neill wasn’t present at court.

Mr Rice remarked that it was agreed at the time that an independent specialised party would be appointed to validate the amount due and stated that this hasn’t happened. He also claimed that the interest due should not exceed €200,000.

Meanwhile, the company’s senior counsel, Rossa Fanning, stated it was clear from letters and other documents that the liability was joint and several, meaning both men were liable for the full amount, either individually or jointly. Rossa pointed out that Mr Rice had admitted liability.

Justice Kelly postponed the case to permit time for Mr Rice to get legal advice and deal with a number of other issues.

CMC Markets has been announced as the winner of best CFD provider and best spread betting company categories by members of the Trade2Win trading community. CMC which is owned by Peter Cruddas is thought to have about 75,000 clients worldwide, who placed a total of 26 million trades in 2011.

The scope of the Trade2Win Members Choice Awards, which were launched in 2003, is to provide its 252,000 members with a voice in which to recognise the innovative and high quality service and products from companies in the world of trading.

Doug Richards, Chief Executive Officer of CMC Markets stated that since launching in 1989, CMC’s ultimate goal has always been to become the global leader in the online trading business. He noted that this recognition from Trade2Win’s members reflects the company’s continual efforts to evolve and respond to the needs of their clients, bringing them the best possible trading experience via innovative technology and premium education.

He added: “Whilst we encourage our traders to learn from our selection of education tools, we also want them to learn from each other through our community initiatives such as our monthly Traders’ Club. Throughout 2012 it is not only our aim to offer the very best trading technology but to create a unique trading community for our clients.”

InterTrader has launched a new online training course catering to spread traders of all levels.  Hosted by expert trader Steve Ruffley “The Building Blocks of Trading” consists of five two-hour sessions every Tuesday, starting on 17th January and finalising on February 14^th.

The training programme covers the fundamental aspects of trading, ranging from routine planning all the way down to trading psychology.  Attendants will be supplied with training material and Steve Ruffley will be available to respond to any questions during the sessions.

Course Schedule:

    Title                        When                 Description
                                                      Setting goals is a
                                                      main part of life
                                                      and also business.
                                                      Devising a trading plan
                                 Tuesday 17th January is the key foundation
    Session 1 - Trading Plan     7.00-9.00 pm (GMT)   of stock market trading.
                                                      The markets are volatile
                                                      by their very nature and
                                                      a spread trader has to
                                                      absorb and react to a
                                                      constant stream of
                                                      new information. Learn
                                                      how to absorb the info
                                                      and take advantage of
    Session 2 - Planning &       Tuesday 24th January fluctuations in the
    Preparation                  7.00-9.00 pm (GMT)   stock markets.
                                                      Learn how to manage
                                                      your risk capital and
                                                      when to follow your
                                                      risk strategy consistently
                                                      to the letter, but
                                                      even more importantly
                                 Tuesday 31st January when to adapt it to
    Session 3 - Risk Management  7.00-9.00 pm (GMT)   market conditions.
                                                      Managing and controlling
                                                      your mindset (psychology)
                                                      is probably the most
                                                      underrated part of
                                                      trading. Learn how
                                 Tuesday 7th          to turn from a good
                                 February             trader into a great
    Session 4 - Psychology       7.00-9.00 pm (GMT)   trader.
                                                      In this section you
                                                      will learn how to
                                                      use advanced
                                                      oscillators in
                                                      conjunction with
                                                      the overall trend
                                 Tuesday 14th         and how to capture
    Session 5 - Oscillators and  February             the market
    technical analysis           7.00-9.00 pm (GMT)   sentiment.

When brokerage firm MF Global collapsed on 31 October 2011, many of its UK spread betting clients were left wondering when — or even “if” — they would get their deposited funds returned.

After a series of accusations of foot-dragging on the part of the administrators (KPMG) and the UK Financial Services Authority (FSA), there may be light at the end of the tunnel now that KPMG has announced a possible interim distribution of clients’ funds to happen in mid-February.

While clients’ cash should typically be held by brokerage firms in segregated accounts, entirely separately from the firms own money, returning the funds recovered from unwound positions is neither straightforward nor quick despite the Financial Services Authority’s new “Special Administration Regime” (SAR) that is designed to speed up the return of assets to creditors. Some clients including professional asset managers had questioned the FSA on why cash held in segregated accounts could not be distributed sooner.

Of the MF Global UK client monies and  assets valued jointly at about $1.2 billion, it is expected that more than $46 million (£30 million) will be returned in the near future following an overwhelming vote in favour of the administrators’ proposals.

While the majority of clients will likely see the return of most or all of their claimed funds in due course, the events surrounding MF Global’s collapse and subsequent unwinding serve to underline the importance of not putting all of your eggs in the basket of just one financial institution.