Howdy,

I have a question re CMC if anyone can help.

I want to give short positions a try but i am concerned about the price gapping up and losses going into free for all. I don't mind losing the initial capital in the CFD fund, but am not too keen of funding margin calls running into 10's of thousands.

My question basically is this - when opening a CFD account with CMC as a limited company, is my exposure limited to within the company or do they have some kind of funky Unlimited Director Liability clause thingy?

If they do, is there a way of limiting liability (outside of using guranteed stop losses as i am wishing to protect myself from myself being so damn forgetful!!!)

thank you!!!

AMC - this reply is a little late since I didn't see your post the first time around.

First of all, I'd be surprised if CMC would let you open a derivative account as a limited company. It's not in their interest to allow you to create a situation where you can engineer any kind of limited liability. After all, they're the ones who are going to be on the losing end of that deal. Secondly, as someone who has been a company director myself, I don't think you can just do anything you like with your company. Companies House used to be quite strict on what a company's area of operations was and even though I think these definitions have been relaxed in recent years you must still operate within your Articles of Association. In other words, you can't say you're running a software business and then really run your company as a hedge fund. What's more, you might find there may be a whole set of rules and possibly even qualifications required to do such a thing - in much the same way that you can't just set up your own bank.

Even if you could operate a CMC account as a limited company, you would also have to consider the consequences of the company going bankrupt as a result of your trading. This may lead to your being disqualified as a director for a number of years and even if not, it will probably haunt your personal financial history in a way that may make future loans, mortgages and credit applications harder to obtain. And another issue would be Corporation Tax on profits. I think everything below 10K was zero-rated until the last budget, but now there's a 10% band up to 10K which differs from the 9.2K Capital Gains Tax free band for the current financial year. In any case, the point is that tax rates are different and of course, trading through a company means spending much more time with your company accountant every year and, when Revenue & Customs eventually want to do an audit - and they will - that's going to make the Spanish Inquisition look like a polite phone call in comparison. Remember, they operate on the principle of guilty until proven innocent, and the more complex your affairs, the more digging they're liable to do as they try to work out how you've been defrauding the State. In the end, maybe you've done everything absolutely correctly and they'll eventually have to admit defeat, but not before it's cost you hundreds - possibly thousands - in accountants' fees, not to mention the stress of the Orwellian Machine focusing its attention on you for months - possibly years.

My final point would be that if you seriously think from how you intend to trade that there is real risk of experiencing margin calls running into the tens of thousands as you put it, then this looks like you're going to do something reckless. I do wonder if you've thought about the kind of trades you might do and worked out the numbers? If you haven't, you should.