Awfully honest adverts in the Finance Section
Discussion
I just noticed a couple of adverts that appeared at the top of the Finance section for a couple of broker services.
As part of each one was a "73% of retail investors lose money when trading CFDs with this provider. You should consider wether you can to take the high risk of losing your money" tag.
Is this some kind of law, like fag packets, that means they have to tell you?
As part of each one was a "73% of retail investors lose money when trading CFDs with this provider. You should consider wether you can to take the high risk of losing your money" tag.
Is this some kind of law, like fag packets, that means they have to tell you?
supersport said:
Is this some kind of law, like fag packets, that means they have to tell you?
FCA requirement:https://www.fca.org.uk/news/press-releases/fca-con...
"Provide a standardised risk warning, which requires firms to tell potential customers the percentage of their retail client accounts that make losses."
supersport said:
I just noticed a couple of adverts that appeared at the top of the Finance section for a couple of broker services.
As part of each one was a "73% of retail investors lose money when trading CFDs with this provider. You should consider wether you can to take the high risk of losing your money" tag.
Is this some kind of law, like fag packets, that means they have to tell you?
Yup. Been a requirement for a few years now but only for OTC brokers that run their book in-house. If you sell your risk on to a third party for them to run a book then you avoid having to publish the information. As part of each one was a "73% of retail investors lose money when trading CFDs with this provider. You should consider wether you can to take the high risk of losing your money" tag.
Is this some kind of law, like fag packets, that means they have to tell you?
It's not actually that useful a figure as it's just a simple calculation of which active accounts have losses that month. The problem with that is that it's not weighted and the majority of accounts are small gambling accounts that all lose. The average small trading account is at zero in under 4 months, whereas the larger accounts tend to be profitable as those tend to be investing accounts rather than gambling accounts running with excess leverage.
It's also a little deceptive as it suggests 25% of clients win but they don't, it just means that 25% of clients haven't lost that month but they will be in the 75% next month or the month after.
The true figure for small accounts is close to about 100%.
NickCQ said:
Dr Jekyll said:
Years ago the RAF benevolent fund offered an affinity credit card. The invitation for the credit card included the phrase 'never has so much been owed by so many to so few'. The most honest statement about credit cards I've ever seen.
That's very good 
supersport said:
Cheers, interesting 
For nerds like me anyway. It's part of the reason why there is a huge shift away from brokers running their client book in-house to instead selling that flow to a third party or passing it through some form of exchange.
There's massive expansion coming with registers led exchanges and this is because of your 5 times leveraged FTSE contract isn't a contract written by you for the client but instead bought directly by the client off an exchange then you as the broker can completely bypass all the regs put in to protect the retail client. You don't have to publish loss rates, you don't have to seg client money but can use it yourself. If you then combine that with some form of banking license then suddenly a whole range of new options get opened up.
All those binary bet brokers who triggered the need for all this extra regulation haven't gone away but instead are coming back in with the same practices but using the Robinhood mechanism of running the client book off your own balance sheet and routing the flow via pseudo exchanges so as to completely bypass all the regulation.
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