Frequently Asked Questions

FSA/PN/009/2009
14 January 2009

The Financial Services Authority (FSA) has today confirmed that it will extend its disclosure obligation for short selling of stocks in UK financial sector companies until 30 June 2009. The decision follows strong support for the proposals on which the FSA consulted last week.

Disclosure of a net short position in the stock of a UK financial sector company will continue to be required once a position reaches 0.25% of a relevant firm's issued share capital. However, from 16 January 2009, further disclosure will only be required if a short position changes by a further 0.1% of issued share capital (i.e. at 0.35%, 0.45% etc).

The FSA will allow the ban on short selling stocks in UK financial sector companies to lapse on Friday. These changes will take effect at 00:00:01 on 16 January 2009, permitting short selling of these stocks on Friday.

The FSA plans to issue a further consultation paper with proposals on longer-term options for a short selling regime within a few weeks.

Financial spread betting is an efficient, tax-free* alternative to trading with a traditional broker. It allows you to speculate on share price movements, while avoiding any brokerage fees or commissions.

Financial spread betting is based on a simple premise. If you think that a certain financial market or product will rise in value, then you buy the market/product. If you think that a certain financial market or product will fall in value, then you sell it.

Buying a rising financial market or product: After buying a financial market or product that you believe will rise in value, then if your prediction is correct, you can sell the market or product for a profit. (If you are incorrect and the value falls, you make a loss.)

Selling a falling financial market or product: After selling a financial market or product that you believe will fall in value, then if your prediction is correct, you can buy the market or product back at a lower price, for a profit. (If you are incorrect and the value rises, you make a loss.)

ETX Capital quotes a spread around the live, underlying market price and you can spread bet on whether this market value will rise or fall. When financial spread betting please remember that you own the “price” of the share and not the actual underlying share.

The spread is the difference between the buying and selling price of a financial market or product. It represents the market-maker's potential profit or loss on a transaction.

For example, say the FTSE Daily Cash has a price of 5894-5896 points. That means that you could sell for 5894 points and buy for 5896 points. The spread would be 2 points.

If you believe that the FTSE Daily Cash will rise in value, then you request a price via the ETX Capital website www.etxcapital.co.uk. You will see the spread, e.g. 5894-5896 points, then you buy at 5896 for an amount (the minimum amount with ETX Capital is 50p) per point movement†. If the price moves up to 6014-6016 and you sell at 6014, you would realise a point profit of 6014 (the price you sell for) minus 5896 (price you bought for) = 118 points. As you have placed a spread bet of £1 per point, you would make a profit of £118 (£1 multiplied by 118). Obviously, had the market fallen in value you would have incurred a loss (opening price - closing price x stake).

† You can decide on the amount you spread bet per point, based upon the bet size range currently offered by ETX Capital, and the funds you have available to speculate with in your account.

To limit your risk, it is recommended that you place stop losses when you open a new position. This will help protect you if the price moves against you. In some cases however, due to market volatility it may not be possible to stop you out at your specified level. If this should happen then you will be stopped out at the next available price which may be outside of your stop level.

Financial spread betting offers significant advantages over more traditional forms of trading

Financial Spread Betting is Tax free*

Any profits or losses you make are free from UK capital gains and income tax*.

Financial Spread Betting offers more flexibility.

Financial Spread Betting with ETX Capital offers you the flexibility to spread bet on a wide range of financial markets or products on one platform using one currency — £, $ or €.

Ability to profit from Financial Spread Betting when markets fall as well as rise.

Financial spread betting allows you to go short in order to make a profit from a falling market by buying again later or at a lower price. In volatile market conditions, the ability to make a profit on both up and down swings can prove lucrative.

Financial Spread Betting offers the opportunity to make geared spread bets. For example, a company offering 10% gearing will allow a deposit of £100 to control an exposure of £1,000 worth of shares. Gearing therefore maximises any potential profits, but carries a high degree of risk. Please remember that the markets can move against you as well as in your favour, you should only speculate with your money if you can afford to lose. Please ensure that you fully understand the risks involved with Financial Spread Betting, and seek further advice if necessary.

ETX Capital Financial Spread Betting accounts, can be opened with a minimum deposit of only £100. The minimum deal size is 50p per tic/point.

Financial Spread Betting with ETX Capital is free from trading commissions (account fees, Stamp Duty and Capital Gains Tax)*

Do you trade shares? Try financial spread betting

• No CGT tax on profits*
• No stamp duty
• Easy on your capital - instead of paying the full value of your share position, you are only required to pay a percentage deposit. This is commonly known as 'gearing', and margin requirement can be as little as 5% of the total contract value.
• Go 'short' to take advantage of bear markets - you can place a 'sell' bet on the price of a certain share falling.
• Hedge an existing share portfolio

Financial Spread Betting with ETX Capital offers you the opportunity to spread bet on the following asset classes:

• Stocks
• Indices
• Foreign Exchange
• Commodities
• Options
• Bonds
• Interest Rate

See our Market Range page for more information on the instruments offered or contact us on 0800 138 4582

By coupling the many benefits of spread betting with the transparency of the traditional cash market this contract type has revolutionised the spread betting market. The Daily Rolling bet does not have a fixed expiry date (unlike the Daily or Quarterly Bets) and will continue to ‘roll over’ at the end of each trading day. These Bets can be opened and closed at any time during normal trading hours. If a position is held overnight a small financing charge is applied to the trade.

Unlike Daily Rolling Bets, Daily Bets do have an expiry date. As the name suggests this type of bet will automatically expire at the end of the trading day. Customers can close these Bets at any time before the end of the day expiry. As this bet only exists during the trading day it does not incur any overnight financing charges.

Quarterly Bets have a fixed expiry date. With the finance costs already built in to the trading price the Quarterly Bet does not incur any daily or overnight finance charges. Potential dividend adjustments are also included within the quoted price. With both financing and dividend adjustments added to the quoted price the quotes shown will look different to both the underlying cash market and the any Daily or Daily Rolling bets.

Financing charges are only ever incurred if a trading position is held overnight. All future dated contracts such as the Quarterly Bet have the finance charge incorporated in to the quoted price. The quoted Daily Rolling Bet is based on the underlying cash price and will only incur a finance charge if held over night.

Margin products such as Spread Betting, CFDs and Forex allow investors not to have to put up the full value of the position. Essentially clients are borrowing money from the margin provider to take larger positions in the market. As in normal life interest is payable on any money borrowed and in this case it comes in the form of a Finance charge. However, it is important to remember as customers can ‘short‘ the market they may actually receive interest from the margin provider.

Financing is calculated on Rolling Bet positions held overnight and is credited or debited at the end of the trading day.

Daily finance costs are applied to the account at the end of the trading day and can be calculated using the following equation;

Notional Size of Position x Finance Rate x Number of days position is held ÷ 365 days

i.e. £10,000 x 2.5% x 3 ÷ 365 days = £2.05 per day

At ETX Capital all spot FX bets are automatically rolled every evening at 8pm (London Time).

Rolling over a spot FX bet involves the closing of the current days bet and the re-opening of a new position for the next days trading. The overnight charge (known as TomNext) plus an ETX Capital admin charge is applied to the account the following business day and appears as a cash ledger credit or debit.

Rolling Spot Worked Example

• Client buys ( goes ‘long’ ) GBP/USD £1 per point at a price of 1.5000.
• Assume UK Base rates are currently 2% with US rates at 1%.
• Hypothetically position should earn 1% (+ 2% on the GBP holding minus 1% on the USD).
• GBPUSD TomNext = Short -0.7 ; Long -0.6
• Client closes GBPUSD position at 1.5000 Having bought (gone ‘Long’) GBPUSD the charge would be calculated thus;

Long GBPUSD TomNext + ETX Capital Admin Charge

-0.6 + 0.45 = -0.15

In this example the client would receive 0.15 pips (ignoring the minus sign) which when multiplied by the stake shows the client would receive a credit of £0.15 for a single night roll. Over a weekend clients are charged/credited for each day they hold the position (3 days) but will only incur one ETX Capital admin charge.

The TomNext is a market tradable swap rate which is more than just an interest differential. The TomNext swap price also encompasses market sentiment and future interest rate expectations. This rate often fluctuates constantly even when interest rates are stable.

Equity Quarterly Bets: Equity Quarterly Bet prices are derived using the underlying cash market for the stock then applying financing and any dividend adjustments.

Index Quarterly Bets: Index Quarterly Bet prices are derived using the price of the actual exchange quoted Futures market that the product represents.

Currency Quarterly Bets: FX Quarterly Bets are priced using the appropriate spot rate for the market and deriving a forward price using the interest rate differentials between the currencies concerned.

Commodity Quarterly Bets: Quarterly Bets are available on a number of UK and US based commodity markets such as gold, oil, copper and natural gas. Quarterly Bet prices are derived using the price of the actual exchange quoted Futures market that the product represents.

If you have any questions about Financial Spread Betting with ETX Capital please contact us:

Phone
Customer Service: +44 (0) 20 7392 1494
Dealing Queries: +44 (0) 20 7392 1434
Marketing: +44 (0) 20 7392 1482

Email
If your question is about your account, or about depositing/withdrawing money, please send an e-mail to help@etxcapital.co.uk.
If your question is about trading or about a specific trade (please include order number), please send an e-mail to customerservice@etxcapital.co.uk.
If at any time you feel that you are not getting the answers you need please send an e-mail to csmanager@etxcapital.co.uk.

Post
Our postal address is:

Our trading platform will run on Windows Vista, XP & Windows 2000. Mac OS X & Linux platforms are also supported.

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Yes, ETX Capital is a trading name of Monecor (London) Ltd and is authorised and regulated by the Financial Services Authority. FSA Registration Number 124721

Monecor (London) Ltd has been a member firm of the London Stock Exchange since 14th April 2008 .

There are three classifications of client:

Retail – Typically small individual customers or small businesses – these clients receive the most protection under FSA rules including the right to complain to the Financial Ombudsman Service if they have registered a complaint with the firm but are not satisfied with the outcome.

Professional – Mainly experienced wealthy individuals or larger firms – Given their knowledge and experience of the markets, these are offered less protection as they are less reliant on the firm for certain matters.

Eligible Counterparty – Certain large businesses, large hedge funds and some Regulated firms – These firms receive the least protection as they are large enough and knowledgeable enough to make their own decisions.

These categorisations were introduced into UK Financial Regulation by the Markets in Financial Instruments Directive (MIFID) in November 2007.

The Financial Services Compensation Scheme (FSCS) is the UK's statutory fund of last resort for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. FSCS is an independent body, set up under the Financial Services and Markets Act 2000 (FSMA). Their service is free to consumers.

ETX is covered by the Financial Services Compensation Scheme. You may be entitled to compensation from the scheme if the Firm cannot meet its obligations. This depends on the type of business and the circumstances of the claim. Most types of investment business are covered for 100% of the first £30,000 and 90% of the next £20,000, so the maximum compensation is £48,000. Further information about compensation arrangements is available from the Financial Services Compensation Scheme, 7th Floor, Lloyds Chambers, Portsoken Street, London E1 8BN.

The Financial Services and Markets Act gives the FSA 4 statutory objectives:

1. Confidence - market confidence: maintaining confidence in the financial system;
2. Reduction of financial crime - reducing the extent to which it is possible for a business to be used for a purpose connected with financial crime
3. Awareness - public awareness: promoting public understanding of the financial system.
4. Protection - consumer protection: securing the appropriate degree of protection for consumers.