Andy, Contracts-for-difference:First and foremost I want to thank you for being patient with me and taking the time to do this interview for our Contracts-for-Difference.com readers. How's everything on your end?
Hayden:All is well, it is certainly looking like a big year for CFDs.
Andy, Contracts-for-difference:Please introduce yourself and your company to our readers and tell us a little about the founders' background and the company's history.
Hayden:First Prudential Markets is a Direct Market Access CFD provider who offer CFDs and shares from the same platform. First Prudential Markets utilizes the resources of Merrill Lynch & Co. Inc and its affiliates in order to facilitate trade execution and position financing.
First Prudential Markets is owned by a number of large investors in the financial services industry including ASX listed CVC Ltd. The founders joined the CFD industry shortly after CFD were introduced to the Australian market. It soon become apparent that traders saw real value in seeing their orders flow onto the market and wanted to be assured true ASX market prices. As a result of this the founders realized that there was a need for Direct Market Access CFD provider that could offer actual ASX prices at low cost via a reliable and user friendly trading platform - webIRESS.
At this point an experienced team of CFD professionals was established, and together with large investors including an ASX listed company CVC Ltd and the resources of Merrill Lynch, First Prudential Markets was set-up to offer an innovative CFD offering.
Andy, Contracts-for-difference:How big is First Prudential Markets? When did you launch? Do you offer full service and/or online brokerage?
Hayden:First Prudential Markets lean on the resources of one of the biggest investment banks in the world - Merrill Lynch which I suppose makes us one of the larger providers in the market. This is how we can offer the largest range of CFDs and also provide the ability to enable clients to use shares as margin. We have offices in Sydney and Melbourne and are rapidly growing.
First Prudential Markets was established about 18 months ago however our official launch to retail clients was not until about 6 months ago now.
We do not give advise (full service) at this stage however we do provide clients with an experienced account manager who will support your CFD and equity trading and enable you to place orders over the phone at no additional cost. We also provide one of the most reliable on-line trading platforms available.
Andy, Contracts-for-difference:Tell us why you decided to plunge into the cfd trading business.
Hayden:The CFD market is growing rapidly and there really is no reason why the current rate of growth will not continue so it made sense for us to join this market. Further more First Prudential Markets has one of the most experienced CFD teams in the market and the ability to offer one of the most comprehensive CFD offering as result of there relationship with Merrill Lynch. Therefore all in all it really was obvious given experience and resources to provide a CFD trading business.
Andy, Contracts-for-difference:Having traded traditionally in shares for years, why might I be interested in progressing into a different type vehicle i.e. contracts for difference trading?
Hayden:The transition from share trading to CFD trading is relatively simple as effectively all trades executed and traded on the same market in the same way and at the same prices as with regular share trading however with many benefits over and over regular share trading.
CFDs enable you to trade on margin which means that with a relatively small outlay you can gain significant market exposure (with $1,000 you can gain up to $20,000 worth of market exposure). Commission rates when trading CFDs are also usually cheaper than with regular share trading.
You can also use existing share positions as collateral which will give you additional trading opportunities to gain market exposure. Many clients also trade CFDs due to the flexibility of the product. For example it is just an easy to take a short position to gain from a falling market as it is to take a long position and all trading information is at your finger tips via our trading platform. Trading CFDs enables retail client's access to a derivative product which is very easy to understand.
Andy, Contracts-for-difference:What dealing platform do you use? What would you say really stands out about it?
Hayden:The platform offered is webIRESS. This platform is used by 50 out of the 80 brokers on the Australian Stock Exchange and we have made it available to retail clients. It is not proprietary however we did have some modifications done.
What stands out about the webIRESS platform is the speed and reliability. Our orders currently hit the ASX in about half a second. We have also had no down time since our launch 6 months ago, so it is one of the most reliable platforms available. Another benefit is that webIRESS is browser based; this means that no download is required to run the platform so our clients have the flexibility to trade on any computer provided they have internet access.
Andy, Contracts-for-difference:Could you walk us through First Prudential Markets products? In particular what types of underlying investments, markets and events can I trade on? Also, can I trade different types of vehicle through a single account?
Hayden:First Prudential Markets offers the largest range of CFDs from the ASX, we also offer share trading on the entire ASX. We plan to expand our range of products and are presently developing products for Shares, CFDs and futures on international exchanges such as Hong Kong, Korea, Japan, UK & US.
Andy, Contracts-for-difference:What is the procedure for opening an account? What is your firm's minimum account size? What is the minimum amount of risk capital a beginner must have to begin trading?
Hayden:Our account opening process is very simple. To open an account you can make an enquiry on our website and an account application package will be emailed to you. The forms need to be filled out then faxed, emailed or posted to our office. The approval process takes approximately 30 mins. Once approved the account number and banking details are e-mailed to the client. The client is then required to fund the account to commence trading immediately.
The minimum account opening balance required is $5000.
Andy, Contracts-for-difference:Do you also accept international clients or only Australian nationals?
Hayden:Currently we have received substantial interest from international clients and provide both CFD and Equity trading services for them.
Andy, Contracts-for-difference:What types of client do you aim to attract? What type of client and what type of uses are your particular products most suitable for? How do you classify clients - intermediate or private customers? As we know classifying clients as intermediate indicates a certain degree of knowledge and experience on the clients' part.
Hayden:The majority of our clients are serious traders and investors. These clients are well educated and savvy, and have generally ended up with First Prudential Markets after investigating or trading with other providers.
We have two client classifications, institutional and private.
Andy, Contracts-for-difference:Do you offer Direct Market Access (DMA) or Spreads?
Hayden:We are Direct Market Access and guarantee exact market prices on all trades. Our systems are set up so that our clients actually activate our hedge for us. This means fast execution and price transparency.
Andy, Contracts-for-difference:Do your products involve telephone or online trading, or both? Is there a cost difference if both are offered?
Hayden:We do have phone trading. There are no additional charges applicable.
Andy, Contracts-for-difference:Do you quote all Australian companies or only those within a substantial market cap?
Hayden:FPM offers the top 560 ASX stocks. This is the largest range of ASX of any provider.
Andy, Contracts-for-difference:Do you offer after-hours trading? Please tell us about your financing charges and commission charges on equity CFDs
Hayden:Trading hours are between 10am and 4.15pm. This will be extended as our range of product grows into futures and international exchanges.
First Prudential Markets currently has the lowest Direct Market Access unrestricted commission rate available in Australia of 0.10% commission. Financing rates are determined on client turnover and start at 2% plus RBA on long positions and RBA - 2% on short positions.
Andy, Contracts-for-difference:Is interest paid on the balance of the accounts? If yes, what are the rates? Are dividends paid out?
Hayden:Interest is paid at 4.75% of all free equity in your CFD account. This is calculated as the RBA rate minus 1%.
Andy, Contracts-for-difference:Please explain how you handle re-quotes and order confirmation times (if any). If I place an order will the price be re-quoted? And fast markets?
Hayden:You will NEVER receive a re-quote as all trades are executed on the underlying cash market. Orders are executed within quarter of a second and confirmation can be seen immediately on the trading platform.
Andy, Contracts-for-difference:Can one participate in the auctions at the scheduled open and close of the market? Please also clarify your policy regarding using stops in the pre-open phase of market? For instance, if I had a stop loss for a stock and the estimated opening price was below the stop loss level, would you stop me out of the trade due to potential margin breach before the market opened?
Hayden:We allow trading in all market phases including the opening and closing auctions. If the estimated opening price was below your stop you would not be stopped out. If this resulted in a margin breech we would contact you to determine the best solution. This solution could be to add funds to your account or reduce your exposure.
Andy, Contracts-for-difference:What level of leverage do you offer as standard?
Hayden:Exposure starts at 20 times or a 5% margin.
Andy, Contracts-for-difference:Do you offer stop entry and stop loss orders? What are the charges (if any) associated? Is a guaranteed stop loss (GSLO) offered, and if so at what level.
Hayden:We have a wide range of contingent orders. At present there is no extra charge for any of these orders. We currently do not offer a GSLO.
Andy, Contracts-for-difference:Is your platform suitable for both charting and dealing? If so, are the quotes live or delayed?
Hayden:Our platform has charting and dealing functions. All data is live real time, no delays.
Andy, Contracts-for-difference:Do you offer interest on any credit? If so, at what rate?
Hayden:We pay 4.75% on all free equity.
Andy, Contracts-for-difference:Contracts for difference are sometimes criticized because one can end up paying interest not only on the margin and the 'borrowed' amount, but also on the profits. Please comment.
Hayden:There are two sides to this comment. Indeed if you profit in a long position your charges will increase. Interest is charged on the full notional value calculated on a mark-to market basis and this is the same with all CFD providers. This is because that in order to offer the many benefits of CFD, providers themselves may be liable to pay interest on the full notional value of client open positions. However it is important to note that your interest payment will be less if a position goes against you.
Andy, Contracts-for-difference: How do you make most of your money?
Hayden:We make money from commission and financing.
Andy, Contracts-for-difference:Are the commissions negotiable? i.e. are traders who trade bigger amounts or more frequently eligible for discounted commission rates or other perks?
Andy, Contracts-for-difference: Are there any inactivity fees? Any other fees/commissions that our readers should be aware of?
Andy, Contracts-for-difference:Who is holding my money and how safe is it?
Hayden:Client funds are held in a Client Segregated Account with National Australia Bank Limited under Australian Client Money Rules. In addition to this we are 100% hedged. This gives our clients the piece of mind that all funds are safe and FPM takes no proprietary positions and therefore runs no risk.
Andy, Contracts-for-difference:Are there traders who make a living through contracts for difference at www.fpmarkets.com.au? What is the trading style and methods that these traders use for winning consistently?
Hayden:We have many clients who are full time traders. Discipline is the most common trait among successful traders.
Andy, Contracts-for-difference:Do you offer managed funds?
Andy, Contracts-for-difference:What services are you offering that others aren't? Why should clients choose First Prudential Markets as their CFD firm of choice?
1. 0.10% commission for life - Australian's lowest DMA
2. Equities and CFDs from one platform
3. Share Collateral facility
4. webIRESS trading platform
5. Australia largest range of CFDs from the ASX
6. Personal Service
Andy, Contracts-for-difference:Do you trade on a personal basis?
Hayden:Since the commencement of First Prudential Markets I no longer trade. It would be a conflict of interest.
Andy, Contracts-for-difference:Do you favor technical or fundamental analysis?
Andy, Contracts-for-difference:Do you provide any training for new clients?
Hayden:Our First Prudential Markets dealers sit on the phone with all new clients for the first few weeks providing personal training on the platform. We also have many clients that attend our free seminars and come into our office for free training.
Andy, Contracts-for-difference:Who is predominantly making up your customer base at this time? Also, what kind of people are your customers - i.e. retail or institutional?
Hayden:Generally we seem to be attracting more serious retail traders however all traders are welcome.
Andy, Contracts-for-difference:What books, seminars and/or courses would you recommend?
Hayden:We hold seminars on CFD strategies. These include an introduction to CFDs, information about our products. Training on our platform.
Andy, Contracts-for-difference:Do you have any special sign-up trade offers for our readers who decide to go ahead and open an account at www.fpmarkets.com.au
Hayden:If your readers contact http://www.fpmarkets.com.au we will definitely offer a reduction in costs.