Pacific Trader Interview

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Interview with Mr Matthew Bristow, Trading Desk Manager of Pacific Trader, the Derivatives trading division of the Pacific Continental Group

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?

Matthew: The start of 2006 is proving to be very exciting for Pacific Continental, as our principal fund has just received a top-5 global rating by the Barclay Group and there is a lot of excitement surrounding A-Day (6th April 2006, when the pension reforms come into being) with many of our clients looking to set up SIPP trading accounts in addition to their personal trading accounts.

Andy, Contracts-for-difference: Before we get to your service, can you give us a quick run down on how you first got involved in this industry and for how long? Please introduce yourself and your company to our readers and tell us a little about the founders' background and the company's history.

Matthew: I came to Pacific Continental on their graduate program, after graduating with a 2:1 Joint Honours Economics degree from the University of Leeds. I had worked for one year in Paris prior to joining Pacific 5 years ago and decided to pursue a career in the City. As for Pacific Continental, the firm has just celebrated its 45th birthday. Pacific was established in 1961 and were subsequently bought out in the 1980s by a Hong-Kong based investment bank, who were looking to expand in the retail/ institutional broking market. We now have offices in Hong Kong, Switzerland, Germany, Sweden and Australia, with our Head Office on Cannon Street in the City.

Andy, Contracts-for-difference: Ok to start, when did www.pacifictrader.co.uk first open for business?

Matthew: Pacific Continental opened for business in 1961 and PacificTrader, the derivatives trading division of Pacific Continental, started in 2001, following the rising demand for more modern trading tools, in particular CFDs among private investors.

Andy, Contracts-for-difference: How do you select your Account Management team, Analysts and Traders?

Matthew: Our clients have often told us that the quality of the trading team here is one of the principal reasons for choosing PacificTrader as their preferred broker. All of the Account Managers at PacificTrader are top graduates from leading Universities in the UK and around the world. We offer a graduate program and take on new graduates in two intakes during the course of the year. Our analyst team is made up of internal and external analysts who have run Hedge Fund portfolios, managed individual client funds and received extensive analysis education and training before they arrive at PacificTrader. As for the traders, they come from a very varied background from former pit traders to brokers and investment managers.

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?

Matthew: That is a very good question. We only accept clients who we feel will benefit from the tools we can offer as part of their investment portfolio. In applying to PacificTrader, clients go through a fairly strict screening profile to determine their suitability, including typical trade duration, trading style and risk profile. Forex, Futures, Commodities and CFDs can all be highly profitable trading tools, but are not suitable to all investors, so we will do our best to match the right products to the right people.

Andy, Contracts-for-difference: What types of underlying investments, markets and events can I trade on? Can I trade different types of vehicle through a single account?

Matthew: All of our clients can trade all the available products through a single platform in a single account. That includes over 20,000 products in over 30 markets around the world. In simple terms, we specialise in Shares, CFDs, Futures, Commodities, Foreign Exchange and Foreign Exchange options.

Andy, Contracts-for-difference: What dealing platform do you use? What would you say really stands out about it?

Matthew: While many of our clients choose to trade over the phone, most will use the PacificTrader platform. Most of the positive feedback we receive is about the number of different products available on a single platform, the instant trade execution and the smooth real-time chart and real-time account capabilities. In April 2006, we are launching a brand new version of the PacificTrader software, so keep an eye on pacifictrader.co.uk for all the latest news.

Andy, Contracts-for-difference: What is your company's main activity?

Matthew: Our Fund Management division is growing at the fastest pace due to the success they have enjoyed over the last couple of years, but as far as the trading division goes, CFDs and Futures are our main business.

Andy, Contracts-for-difference: What is the procedure for opening an account? How much do I need? Is there a maximum deposit?

Matthew: Our minimum account balance is higher than most of our competitors at £10,000 as we provide a higher level of service for our clients. For that reason we need to have a minimum account size to maintain low commission charges, while at the same time ensuring that all of our trading clients receive the level of attention they require. Most of our accounts are under £5 million account balance.

Andy, Contracts-for-difference: What are the minimum/maximum trade sizes?

Matthew: There is no minimum trade size, but there is a minimum charge of £8 per CFD trade. We offer direct access for CFDs and Futures, so the liquidity available in the market is the only restriction. For Forex trading, we guarantee instant execution on all the leading currency pairs up to $20 million.

Andy, Contracts-for-difference: Do you accept international clients? Do you accept deposits by BACS? Which other payment methods do you accept?

Matthew: We enjoy a strong relationship with the other branches of Pacific Continental around the world and hence have many international clients, with the additional benefit of being able to provide offshore trading facilities if required. We accept all bank transfers (typically CHAPS and BACS), as well as personal cheques.

Andy, Contracts-for-difference: Are clients treated as intermediate clients or private investors?

Matthew: As we offer best execution, we can accept both private and intermediate accounts. This means that the price we trade is passed on to the client directly without an increase in spread or market manipulation. Unlike many brokers, we do not profit from our clients' position in the market.

Andy, Contracts-for-difference: Please tell us about your commissions for the different products on offer.

Matthew: As we have the licence to provide structured analysis and advice to our clients, we have a full range of commissions, depending on a client's requirements. Our clients range from institutions to the private investor and there is no fixed commission. Trading costs are dependent on account size, volume and service level required, but suffice to say we maintain a highly competitive charging structure.

Andy, Contracts-for-difference: I note with interest that you offer managed account services. What are your fees for managing clients' accounts (joining or annual fees.etc) and how has your funds performed in the past?

Matthew: Pacific Continental offers access to managed funds through our fund management division and we are proud to say that they have performed very well in the past. These can be tracked through Bloomberg (search Pacific Continental). As for advisory accounts, there is no management fee, no joining fee and no cancellation fee. Our clients simply pay if they take our advice and run a position. It is possible to run both an execution (reduced commission) account and an advisory (higher charges) account simultaneously.

Andy, Contracts-for-difference: Do your products involve telephone or online trading, or both? Is there a cost difference if both are offered?

Matthew: Our clients enjoy trading online, as well as via the telephone and there is no cost difference for a client using both.

Andy, Contracts-for-difference: Do you offer credit facilities? Can accounts be overdrawn?

Matthew: We do not offer a credit facility and accounts cannot run an overdraft.

Andy, Contracts-for-difference: What margin is required for trading contracts for difference at www.pacifictrader.co.uk?

Matthew: Again, there is no strict answer to this question, but clients will typically operate CFDs at 10% margin. We also have clients who run CFD accounts with no margin, who simply want to take advantage of the benefits and cost reductions of CFDs, without using leverage.

Andy, Contracts-for-difference: Do you quote all UK companies or only those within a substantial market cap? What kind of notional risk can one expect on a typical market? Can one trade outside market hours?

Matthew: As we provide Direct Market Access, clients can only trade during market hours, though we will allow certain clients to also trade the closing auction. We specialize in highly liquid shares, so typically FTSE250 or above, along with 18 other stock exchanges around the world. I would refer you to one of our traders to discuss notional risk on a typical market as this changes on a day-by-day basis. I would normally advise clients to take the previous worst one-day performance in a stock and presume it's going to be worse than that when evaluating risk/ volatility on a trade.

Andy, Contracts-for-difference: Is interest paid on the balance of the accounts? If yes, what are the rates? Are dividends paid out?

Matthew: We pay 100% of dividends and offer interest on accounts from approx 2% interest to 4.25% interest depending on the size of the account.

Andy, Contracts-for-difference: What is the typical level of risk involved with your products? What is the potential risk and reward level?

Matthew: All derivatives products carry a high degree of risk, so trade with caution. At the same time, our clients have total control over their exposure, so can run very small trade sizes and hence trade with a low level of risk and lower potential reward.

Andy, Contracts-for-difference: Please detail the kind of stops and market orders being offered by Pacific Continental Securities. Do you offer guaranteed stops?

Matthew: We can offer guaranteed stops, but I would normally advise against them as they are expensive to use and over the long-term if you are trading correctly, you will pay a lot more out to your broker by using guaranteed stops than you will get back by a position going through the stop. We offer Market, Limit, Stop, Stop Limit, If Done, OCO and If Done OCO orders depending on which market and instrument the client is trading. Apart from guaranteed stops, all orders are free to place.

Andy, Contracts-for-difference: What is the Initial Margin Requirement (and general margin requirements)?

Matthew: Initial Margin is typically 10% for CFDs, 1% or 2% for Forex and exchange minimum for Futures.

Andy, Contracts-for-difference: Are there any general safeguards for clients - protected accounts for clients' money or segregated accounts.etc?

Matthew: All of our clients enjoy segregated accounts, so their funds are protected.

Andy, Contracts-for-difference: On your site you make reference to different trading rates according to whether one is a gold/silver or bronze member. How do these work in practice?

Matthew: Gold, Silver and Bronze rates are approximate bands for trading volumes and hence charges. The best thing to do is call the trading desk, ask for one of the Account Managers and they will quote you an individual charging structure based on your forecasted trading volumes and/ or level of analysis, advice and service required.

Andy, Contracts-for-difference: Are there traders who make a living through contracts for difference at www.pacifictrader.co.uk? What is the trading style and methods that these traders use for winning consistently?

Matthew: We are fortunate enough to have long-standing relationships with many clients who use CFDs to generate their principal source of income and their trading styles vary from aggressive currency day-traders to non-aggressive equity swing traders. The most useful advice I could give is to develop a trading strategy to suit your personality and constantly work to learn from your mistakes and improve your strategy.

Andy, Contracts-for-difference: Do you operate any other sites besides www.pacifictrader.co.uk?

Matthew: You can find our main company website at www.pacconsec.com

Andy, Contracts-for-difference: How much experience do I need to have in traditional share trading before considering CFD trading?

Matthew: I would say at least 1 year share trading experience, but the more the better. If you have a profitable share trading portfolio, then chances are good that you can translate that experience into a profitable CFD trading performance. At the same time, using one of the best tools in the market doesn't guarantee making money. We will do what we can to prevent clients from making basic trading mistakes in the early stages of trading, but it is not easy and mistakes are inevitable, so keep your trade size small and be prepared to learn from your mistakes. Keep a hardback book available and write everything down, so you can look back and consult your notes at a later date.

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. do they tend to have City experience?

Matthew: Our retail (private investor) clients range from mid 20s to mid 70s, full-time working to long-time retired and for the most part without professional experience in the City.

Andy, Contracts-for-difference: Are there any other fees which our readers need to be aware of besides your commissions? Do you charge a quarterly trading account fee or an account inactivity fee or a fee for cfd trades made over the phone.etc? Are there any charges for telegraphic transfers and late payments.etc?

Matthew: You simply pay when you trade and there are no other charges. 3-day BACS transfers are free, but if a client requests a same-day money transfer, there is a £20 charge.

Andy, Contracts-for-difference: Is it possible to offset losses against gains with contracts for difference (for tax saving purposes)?

Matthew: Yes, you can offset capital losses with profitable CFD trading and equally if you make a loss trading CFDs, you can offset those losses against other capital gains.

Andy, Contracts-for-difference: Because of financing charges, does this mean that CFDs are not good for holding over long periods?

Matthew: In general, that is correct. It is not sensible to use CFDs if the average duration of a trade is more than 6 weeks. After that time, you lose the cost benefits of CFDs over savings by paying no stamp duty on a UK equity trade.

Andy, Contracts-for-difference: Do you provide an advisory service? Any other services that you provide?

Matthew: Yes, we have the licence to provide tailored advice, education and analysis.

Andy, Contracts-for-difference: What services are you offering that others aren't? Why should clients choose Pacific Continental Securities as their CFD firm of choice?

Matthew: As well as a market-leading, award-winning platform for our execution clients, we are constantly striving to better educate our less sophisticated clients. We were the first firm in the market to allow clients to trade within their SIPPs, the first people in the market to allow non-margin CFD trading and we are always looking for improved products and services to offer our clients. Unless they request otherwise, we communicate with our clients at least once every day to make sure that our clients are among the best informed traders in the marketplace.

Andy, Contracts-for-difference: What do you think about education? Do you think people need it to be successful in CFD trading?

Matthew: Trading is a discipline, which people need to learn by educating themselves and then spending a long time gathering practical experience. If you want to be successful, you have to make a plan, manage your money correctly, control your downside risk and never stop learning.

Andy, Contracts-for-difference: Do you trade on a personal basis? Have you made any mistakes along the way that you have learned from? If so, would you describe them?

Matthew: Our compliance department prevents us from running any positions on a personal account with a trade duration of less than 30 days, so unfortunately we are not able to trade.

Andy, Contracts-for-difference: There are many sayings in the markets; do you have a favourite one?

Matthew: There is more money to be made in tomorrow's winner than in chasing yesterday's

Andy, Contracts-for-difference: Is Pacific Continental Securities profitable?

Matthew: Pacific Continental has been profitable for more than 40 years and continues to grow. We are fortunate to enjoy working in beautiful offices in the heart of the City and are about to take on the latest graduates into our graduate program to further expand our team.

Andy, Contracts-for-difference: Do you provide any training for new clients? Are there any virtual trading facilities?

Matthew: New clients have access to our in-house training facilities, seminars and one-to-one training and can also try out a free simulation of our trading platform by downloading the simulation platform on pacifictrader.co.uk

Andy, Contracts-for-difference: What challenges do you see ahead?

Matthew: Continuing to exceed our clients' expectations.

Andy, Contracts-for-difference: Any books and resources you would recommend to fellow traders? Any other comment you want to make?

Matthew: I would recommend any books on trading psychology. Strange as it may seem, the best analysts in the world can struggle to make money trading the market, as there is a huge psychological pressure of having positions open in the market and the same is true for those new to trading. Manage your money sensibly and do not let a few losses cancel out all your gains.

Andy, Contracts-for-difference: What should our readers do if they're interested in your brokerage services?

Matthew: If any of your readers have an interest in trying PacificTrader or learning more about the training, advice and analysis we provide, they are welcome to contact me directly: mbristowATpacconsec.com, or ask for Matthew Bristow on 020 7961 0409.