This thread was originally created in the Traders room by Sonofagun, he has given me his kind permission to copy it over to here for you all to read and to add any of your experiences.
If we all come together we have the power to change things.
I also recommend to those who haven't subscribed to gain access to the Traders room, to think carefully about doing so as there is a wealth of information in there, including trading tips, tactics, etc, it's very busy and well worth the money in my opinion.

Does anyone know how the meeting on Saturday 18th October went with CMC?

Here we are, I copied this over from the 'Traders room' for all to see, I hope Mike doesn't mind.

Bullshare - 21 Oct'03 - 14:38 - 289 of 300


Meeting Saturday 18th October

First of all thanks to all those who took time to come along on Saturday to CMC offices.

I am sure whatever has been detailed below, and mentioned on here by the others will still leave unanswered questions from users, if this is the case email helpdesk@deal4free.com. That is the place to get your questions answered direct!If you fail, to get a satisfactory answer always refer to their compliance dept.

For those who did not attend I hope you get a flavour of the discussions.

Out of interest, I myself have had an account with CMC, as I also have accounts with other Spread betters and have had cause to complain and like wise cause to congratulate. This goes for all the spread betting companies I have used!!!

This is a synopsis of over 2 hours of discussion.


1) Market Maker Software.

Yes, it has been unreliable . Version 5 fixed some issues and this has been addressed by new database changes and installations over the last couple of weeks. The spread betting and CFD platforms operate separately and have different databases/servers as well as back office systems. The system is being worked on over the next 4 weeks to resolve any further conflicts.

Although CMC admit failings in the system, users should also be aware that sometimes there own network/ISP connection can cause issues.

Any problems incurred are not down to capacity issues at CMC it is mainly database.

They admitted that unreliability was unacceptable and were working on it. They have a team of over 40 techies who look after their systems and develop new products

2) Charting package.

They say it is not good and is only a simple package. They will be adding occasional new features to it, but it is not part of their core business. Those wanting a more advanced system should really be looking to use a third party supplier.

Charts are based on CMCs prices and not the market prices, hence there will be conflicts on chart between high/lows etc compared with the underlying market..


3) Telephone calls.

There was quite a long discussion about this and one of the attendees pointed out particular problems he had with CMC and two individual dealers.

CMC said there was absolutely no excuse for rudeness by dealers on the phone. All dealers should give their name at the start of a conversation. If a user has a reason to complain phone Brian Griffin, Head Dealer, who would take the matter very seriously and deal with the matter. All calls are recorded so CMC can playback the conversation.

If a user does keep having issues with telephone calls maybe they should also tape conversations.


4) Green Tickets

No ticket should be held for more than 1 minute ( this point was debated at length and in users experience this was not the case, often much more than 1 minute).

If someone starts playing the system, the system might refer from an autoquote and pass it over to a dealer to handle (see below). An example would be someone wanting 7000 shares, when there is no volume available in the level 2 order book. A user tries to buy 7000 by pressing 1000 seven times!!!

Freezing tickets might also be a connection issue.

5) Freeze Ups

CMC does not put any trading curbs in place. In a fast moving market shear volume of trading requests in the underlying market coupled with slowness of Market Makers themselves to make prices or answer the phone. If SETS itself is moving very fast this will cause slowness in autoquotes and will also force constant requotes.


6) Slow Quotes:

This is obviously one of the main issues raised by users.

I have therefore broken down how CMC make prices to try and explain why some quotes are slow or why constant requotes occur.

Firstly CMC computers provide an electronic autoquote to a user on both Spreadbet and CFDs . Where the order or request exceeds certain levels then the system will automatically alert a Dealer who will then take over and create a manual quote.

So what are the levels where a requote will occur or when it is passed to a dealer.


a) SEAQ stocks - CMC have no real interests in trading SEAQ stocks. Brians opinion on SEAQ stocks is best left out of print!!

Because of liquidity issues and the way SEAQ stocks operate, via market makers, SEAQ stocks will be handled manually more often than SETS stocks.
If a request to spreadbet or CFD trade is made, the dealers will look at the size available by the best market makers quotes and will also take into account the most recent movement of other Market Makers. On SEAQ stocks, because of the liquidity issues CMC might hedge the position straight away.

b) SETS Stocks. CMC said it was vital for users who were active to have a level 2 pricing system. Why? well CMC base their prices on the level 2 system!!!

CMC will base their prices (both spread bets and CFDs) on the yellow strip where there is enough volume available. e.g if you are after 1000 shares(or equivalent spread bet) and there are 2000 available on the yellow strip(top quote) then the quote should stay valid. If you are after 5000 shares (or the equivalent spreadbet) then the system might refer the quote onto a dealer as it is larger than that available . The dealer will then look at the order book and try and find a position in the order book where your quantity would get filled. On large orders or spreadbet this could be someway down then book. All spread bets are based on the underlying CFD platform , so again anyone wanting a bet will have to follow the level 2 pricing.

This would answer the many issues raised about slow quotes or requotes. If a stock is moving fast and the yellow strip price and or quantity is constantly changing then CMC will keep requoting.



7) Does a clients profitably affect the quotes.

A categorical denial. It is in their interest for users to make money so they will trade more!

8) Bet size and requotes

Hopefully this was answered above in more detail

But, yes bet size will affect the quote, if the bet exceeds levels of stock available at the price on level 2 then a different price will be quoted. So someone with a 5 spreadbet might be at a different price to someone at 50 if there is a thin book, as perhaps would someone wanting 1000 shares against 10,000.

Requotes occur generally where the market is moving fast so CMC have to move their prices in line with the market or where size is an issue.

They also operate a queuing system so on an actively traded stock your request might have to wait for a previous request by a client to be passed through. So although you might see enough stock available on L2, there might be someone ahead of you trying to get a quote. This is why it might seem there is enough stock at L2 and you get requoted as they, as a company, have demand for more than the order book.

9) Why dont CMC display the size they quote in.

This is would be a logical approach, and in theory would resolve many issues on requotes and would create transparency. etc. CMC although understanding the request, felt that this was not currently possible because:

1) they base their prices on L2 order book which constantly changes.
2) They are not allowed to quote level 2 order book levels without charging exchange fees.

I think those attending felt that the excuse for not quoting was not totally valid !

10) Account statements

Yes, this has been an issue and hopefully addressed with the new back office they installed 2 weeks ago and with their new databases.

11) Conflicts of interest.

a)_CMC make their profits by

The spread differential
CMCs approach to hedging (see below).
40% of CMCs business is in the profitable Forex market, an area of business the company was originally founded on.
They pay staff salaries and no bonuses/commissions.

b) Common interest between CMC and Clients.

Just to recap that they want users to make a profit(as above)

c) Do you hedge all positions

No.

Natural hedging might occur internally. As an example: CMC might set a limit of 1000 worth of exposure on a spreadbet. So they might have 15,000 worth of long positions in XYZ and 14,500 of shorts giving a natural hedge with their clients, except for 500 which they will take on board at their own risk. Should the difference exceed say the 1000 they will go and hedge this difference in the markets. This hedge might be through the future or by buying/selling the underlying stock. The hedging risk level will be decided internally, in other words they will take view of where the market or the stock itself will go and hedge accordingly.

d) Can dealers trade. No.

12) Spread Movement:

The underlying spread on SETS stocks is based on the level 2 order book. This spread may move depending on order book itself.

On SEAQ stocks the spread will be based on liquity of stcck, stock available at yellow strip etc. CMC may weight one side of a quote more heavily and this will be partially caused by their own view of where the stock is going. On US stocks the reason for the spreads changes is liquidity issues.

13) Disappearing filled orders

A dealer should always ring/chat before canceling a trade. If this does not happen please complain to the Head Dealer and then Compliance if the issue is not resolved

14) Chat window.

There is no excuse for slowness in CMC answering Chat.

The BOO issue was due to the techies testing the chat system and instead of the Boo appearing on the CMC internal system as a test message it appeared on the external system.

15) Service Agreement

Good suggestion and one they will take on board and discuss further

16) Incorrect margin calls

Hopefully rectified now new back office and database systems put in place in the last 2 weeks

17) After Hours Trading

The number of stocks available is linked to the stocks with US ADRs.

After hours stock prices and spreads are based on these ADRs which inherently have wide spreads and can move fast.


18) Stops

a) Do you move the price to take out stops.

No

b) Is the stop activated on bid/offer or nearest trade.

It is based on the nearest trade that occurs not on prices asked.

Stops will sometimes appear to be slow to be filled as all stops are manually operated by a dealer and are not handled automatically. The Dealer will always wait for a price to trade rather than for the market to quote a price

Stops are not guaranteed unless you take out the guaranteed stop with them.

On gap downs or ups, again they have to go by the nearest traded price which could be someway away from where you have set it.

Removal of a stop is also a manual process by a Dealer hence sometimes slow to go from blue to white.

c) One point slippage

CMC said that they normally allow/suggest a stop 4% away from the current price

19) Indices

These are calculated purely on the Future (not the cash) less fair value. Fair value is constantly calculated and changes. Example given to us, the FTSE Future fair value was 11points.

FTSE 100 cash was at 4368, FTSE Future was trading at 4374 , fair value was 11 points so CMC mid price for their FTSE would have been 4363.

20) Account opening

Yes, they must improve the speed and easy of depositing/withdrawing .

E&OE

So basically CMC avoided most questions (not surprised at all as they are regulated by the FSA). I could never see them admitting that they knock out stops for their own personal gain (a rope and tree comes to mind) although I have to say that recently my fills have been a tad faster so who knows, all the effort that went into the meeting may have made a difference. The future will tell if CMC will listen to its customers, one thing is for certain is that we should all still keep recording on this thread all the problems that CMC give out to us on a regular basis, as we have the power to try and change things, as WE are their bread and butter.

Interesting article on CMC founder:

http://www.timesonline.co.uk/article/0,,2095-867825,00.html