The Tradition group of companies was founded in 1959 and its shares are listed on the Swiss and French stock exchanges. It derives its income from fees and commissions and facilitates transactions on over-the-counter products in regulated markets. Their customer base consists of investment banks, financial institutions and blue-chip corporations and the Group has grown into one of the largest broking networks in the OTC market by number of geographic locations.
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 readers. How's everything on your end?
ETX Capital Representative: Hello Andy, Things are going very well here thank you. Our clients have had a great year.
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? What role do you play at ETX Capital? Tell us a little about yourself.
ETX Capital: My first job in the city was as a runner on LIFFE for Barclays Capital when I was 16. I moved "upstairs" to Barclays Lower Thames St. offices at 18 and spent the next 10 years trading volatility on equity options. Barclays Capital invented CFDs for its US hedge fund client base in 1995 and the product took off from there. Since 1998 I have set up and managed CFD desks at Teather & Greenwood, IFX Markets, ODL Securities and now the spread betting desk for ETX Capital.
Andy, Contracts-for-difference: Could you give us a brief overview of ETX Capital? How big is ETX Capital? When did you launch?
ETX Capital: ETX Capital (formerly known as TradIndex) has existed since 2002 and has grown steadily since then to become one of the major players in the spread bet and CFD arena. ETX Capital was launched in 2004 and employs roughly 30 staff. Our parent company is Compaganie Financiere Tradition who is one of the top three brokers in OTC financial and non-financial products, and no1 in Continental Europe with its international headquarters in Switzerland, Tradition employs over 1800 people in 33 offices located in 16 countries.
Andy, Contracts-for-difference: Could you walk us through Traditions products?
Tradition Uk Ltd offer its clients CFDs and spreads on single stocks throughout the UK, Europe and US markets and well as CFDs on Indices, Currencies, Commodities and Bonds.
Tradition are also a world leader in the brokerage of financial money markets, bond markets, interest rate, currency and credit derivatives, equity derivatives, interest rate futures, and non-financial products (precious metals, energy, pulp and paper and environmental products).
Andy, Contracts-for-difference: Tell us why you decided to plunge into the contracts for difference business?
ETX Capital: CFDs are a natural fit to the existing ETX Capital business. Whilst there are a number of brokers in the CFD market we continue to gain market share due to the expertise of our execution and advisory services.
Andy, Contracts-for-difference: Under which jurisdiction and license does ETX Capital operate?
ETX Capital: ETX Capital is the trading name of Monecor (London) Ltd which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Services Authority, FSA registration number 124721.
Andy, Contracts-for-difference: Are the gains tax-free?
ETX Capital: Spread bet gains are tax free however CFDs are subject to normal tax rates. We've got to keep the chancellor happy after all!
Andy, Contracts-for-difference: Do you accept International clients? In which base currencies can clients trade?
We do accept international clients but of course it depends on the country of domiciliation. I see vast growth in the future for international CFD markets with the UK being the CFD centre of Europe.
Clients can open accounts and deposit GBP, EUROs, and USD.
Andy, Contracts-for-difference: Please tell us about your commissions for the different products on offer.
ETX Capital: We offer execution and advisory CFD services. Our rates for execution only on single stocks are: UK & Europe - 0.2% and US - 3 cents. Our advisory rates are: UK & Europe - 0.4% and US - 5 cents. Our CFD index product is commission free!
Andy, Contracts-for-difference: What is the minimum deposit and minimum/maximum opening trade size (if there is any)?
ETX Capital: We have no minimum deposit or online trade size. Minimum trade size over the telephone is £5000 notional (or equivalent) and there is no maximum.
Andy, Contracts-for-difference: What margin is required for trading contracts for difference at ETX Capital?
ETX Capital: Single stock CFD margin rates start at 10%. Index CFDs start at 4%.
Andy, Contracts-for-difference: Do you offer credit facilities at ETX Capital? Can accounts be overdrawn?
ETX Capital: We do not offer any credit facility for our CFD product. Margin calls are made on client's accounts that are overdrawn.
Andy, Contracts-for-difference: What instruments are available to trade at ETX Capital?
ETX Capital: Single stocks and Indices in the UK, continental Europe and the US, Currencies, Commodities and Bonds.
Andy, Contracts-for-difference: What types of orders are available at ETX Capital?
ETX Capital: Limits, Stops, Ratio and Contingent Orders, Good for the Day or Good till Cancelled.
Andy, Contracts-for-difference: Is interest paid on the balance of the accounts? If yes, what are the rates?
ETX Capital: Yes we pay interest at 1.25% under LIBOR.
Andy, Contracts-for-difference: Will you stop clients who are day-trading effectively? We have encountered traders who have worked hard to develop systems that were consistently profitable only to find that the platform broker/market maker (not ETX Capital) abruptly changed the rules thus killing their trading systems. Please comment.
ETX Capital: We like to encourage all types of investor whether they are short, medium or long term in their investment outlook. We work with our clients rather than against them so that their investment aims are achieved.
Andy, Contracts-for-difference: How do you make most of your money?
ETX Capital: Tradition are exchange members in the majority of the world's stock exchanges so our hedging costs tend to be quite low. This is a cost saving that we try to pass onto our clients thereby increasing their bottom line and increasing our market share. As a commission business ETX Capital derives revenue from its execution and advisory services.
Andy, Contracts-for-difference: How do you see yourselves conquering the contracts for differences market? What is your edge?
ETX Capital: The Tradition group including ETX Capital already has an excellent reputation. ETX Capital will maintain the standards set down by the companies other divisions and ensure that the quality and speed of our service will continue to gain us market share.
Andy, Contracts-for-difference: How do you classify clients - intermediate or private customers and why? - As we know classifying clients as intermediate indicates a certain degree of knowledge and experience on the clients' part.
ETX Capital: CFD customers trading with ETX Capital are classified as Intermediate. As you correctly point out this indicates a certain amount of knowledge and experience.
Andy, Contracts-for-difference: Do you provide an advisory service? Any other services that you provide?
ETX Capital: Yes we have a dedicated advisory team that is integral to our CFD business. As well as ETX Capital, a stockbroking and asset management business also exists.
Andy, Contracts-for-difference: Is ETX Capital profitable? What are your current daily trading volumes?
ETX Capital: Yes, the business is profitable. ETX Capital process over 1000 trades per day and the notional value of transactions is in the tens of millions.
Andy, Contracts-for-difference: Which is your target market? Retail investors or high net-worth and institutional business?
ETX Capital: We currently have a mix of all three of those types of investor so I wouldn't say we have a target market per say. Our website targets most of our smaller retail customers. Our phone execution and advisory team service both hnw's and institutions.
Andy, Contracts-for-difference: What do you think about education? Do you think people need it to be successful in trading CFDs?
ETX Capital: Knowledge is King. It's important that all kinds of investor seek or are provided with product education and good market information. It is also important that investors have an understanding of the nature of gearing.
Andy, Contracts-for-difference: When did you introduce your contracts for difference service? What are your unique selling points with regards to cfds?
ETX Capital: Tradition has been offering its clients CFDs for 1 year. ETX Capital offer its clients multi products on one site, very competitive rates and an A1 execution and advisory service.
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?
ETX Capital: To be honest most of my time is spent working for Tradition and I don't get time to trade PA anymore. My only advice is never invest in a company whose business you don't understand.
Andy, Contracts-for-difference: How do people trading these markets trade? Do they jump in and out 50 times a day or do they hold their trades for weeks?
ETX Capital: We have clients that trade on a daily, weekly and monthly basis although markets and investment opportunities tend to be shorter term nowadays. Most clients have price targets in their mind and tend to stick to that percentage return on their investment. A strategy I wouldn't disagree with.
Andy, Contracts-for-difference: Are there traders who make a living through trading at ETX Capital? What is the trading style and methods that these traders use for winning consistently?
ETX Capital: Yes, we service a number of professional traders who may not have started out as full time investors but have found out they were so good at it its now their full time job. Trading styles tend to be different - from momentum to technical to valuation investors. They each have their own style although the most successful traders tend to be less emotive about their investments.
Andy, Contracts-for-difference: What do you think are the most important characteristics of the professional cfd trader?
ETX Capital: A complete product and market knowledge.
Andy, Contracts-for-difference: We've seen more companies move into this market and the structure of products change. What changes do you think there are going to be over the next few years? What challenges do you see ahead?
ETX Capital: The basic structure of the product has remained essentially the same since I started trading CFDs in 1995 at Barclays Capital. As more clients and investors come to the market and increase their technical knowledge I see the whole CFD and spread bet arena becoming more sophisticated; binary and combination bets are a good example of this. The challenges for ETX Capital will be to keep pace with other CFD providers and consistently deliver a high end product.
Andy, Contracts-for-difference: The last few years has seen an explosion in cfd trading. Do you think it could spell the end of traditional share trading? And is the stock market feeling the pinch?
ETX Capital: I don't think we will see an end to traditional share trading although the London Stock Exchange are definitely feeling the pinch.
Andy, Contracts-for-difference: Are spread betting/cfds as a trading instrument most suitable for intraday traders (daily) or longer term speculators (weekly/monthly)?
ETX Capital: CFDs are suited to all types of investor as they provide so much flexibility. Some clients like to take advantage of the stamp tax saving, some like to short stocks and others prefer an element of gearing.
Andy, Contracts-for-difference: There are many sayings in the markets; do you have a favorite one?
ETX Capital: One I think makes sense is "Never invest in anything you don't understand" and on a less serious note "If you can see a bandwagon, you've missed it!"
Andy, Contracts-for-difference: Any books and resources you would recommend to fellow traders? Any other comment you want to make?
ETX Capital: I read Barbarians at the Gate and Liars Poker when I was 16. They really whetted my appetite and first got me interested in trading. I recently read 'Trend Following' by Michael Covel and found it very useful.