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Spread-betting myths: orders not filled at your price

Created:
25 November 2005
Written by:
Investors Chronicle

"I was watching the stock, it definitely traded at my price, but I didn't get filled"

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This is a complex area, as most spread betters admit, and there is genuine room for confusion. Perhaps the simplest mistake people make is the difference between the share price and the futures price. The spread better will work off the futures price, which factors in the financing fee of holding the future until it expires, up to three months away. So make sure you know which one you are looking at.

An equally basic reason why you cannot trade from the screen is that you are not the only person out there. As Roger Hambury, of CityIndex, points out: "There are probably tens of millions of clients around the world trading the markets and occasionally they will get filled before you. However, in saying that, we do guarantee market price in market size so, if it trades there, you're filled."

Angus Campbell, of Finspreads, points out that his company does not requote clients: "When you request a price online and click on trade, you're done - we guarantee our prices online."

But there are some more subtle reasons why you might not be able to open or close a spread-bet position at a price that you have seen on the LSE. For example, imagine there are 300,000 shares in AstraZeneca bid at 2,500p but only two shares traded at that price. You would see it as a trade but the spread betters would ignore it on the grounds that it was unrepresentative of the real market. The cut-off point may vary from 500-1,000 shares or depend on the value of the transaction.

In the same way, if the normal market size for a share is 2,000 and you want to trade 5,000, you cannot expect to buy or sell the total amount at the price that is quoted for 2,000 shares. Other reasons why spread betters reject prices that appear on the screen are the occasional rogue trades that still happen, and those trades that are reported with a delay.

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