A user has asked: I was after a spread betting platform that offered a no-spread account. SpreadCo were offering it but now say they aren’t bringing it back for a little while so I wondered if I could find such an offer on any other platform? Thanks, Jeremy.
Answer: At the moment you will find it hard to find another promotion from a financial spread betting broker offering zero spreads.
The FCA has been significantly clamping down on incentive offers from margin trading providers to entice new clients to open an account. Back in 2016 the FCA banned CFD bonuses and excessive margins for retail traders. The measures were put into place to ensure that inexperienced investors did not overdeal in an effort to claim cash incentives for trading.
Zero spread offers could potentially fall under an incentive to trade, welcome promotion or commission rebate scheme.
Whilst there are a raft of zero commission brokers this refers to longer-term investing rather than short term speculation on margin.
Zero spread trading may seem like a good idea, but in order to stop scalping, brokers will have to put a time limit on when you can close a zero spread position. In the case of Spreadco’s offer, it was three minutes. A lot can happen in the markets in three minutes. I would guess that the more cost conscience a spread better is, the short their position timeframe would be. So getting zero spreads may actually work against your short term trading strategy if you are locked into a position for three minutes.
There is a lot of commission in the financial spread betting industry and most brokers offer spreads fairly inline with the underlying market. However, there are ways to reduce your trading costs:
- Call your broker and ask (everything is negotiable if you trade the volume)
- Upgrade to a professional trading account (if you qualify)
- Trade with Direct Market Access (DMA execution allows you to place orders inside the bid/offer spread)
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.