CFDs Versus Futures

MoneyAM Shares Magazine

David Jones, Shares: First, as this is a multi-product discussion, could everyone explain what their company does, the products it offers and what these products do?

Foster Bowman, Idealing.com: My company deals equities, CFDs, spread bets and covered warrants, and I'm going to talk principally about our CFD product today. Our CFDs are currently on UK equities but we are launching FX CFDs in the first quarter of next year.

To to bottom: Ben Few-Brown - GNI Touch, Ian Jenkins - Cantor Index, Foster Brown - Idealing discuss spread betting, warrants, futures and cfds as well as their relative differences and advantages

Ian Jenkins, Cantor Index: Cantor Index essentially offers spread betting and CFDs. I am here to talk about spread betting, which is a tax-free derivative that allows clients to go long and short in the world's markets. Again, it has the added advantage of not having stamp duty. You decide however much you want to play in the market, from a very small size to a very large size.

Jones: What does GNI do?

Ben Few-Brown, GNI touch: It is part of Man Financial and covers the whole spectrum of spread betting , CFDs and futures. Futures is my area. We provide access to all the main derivatives exchanges globally on behalf of customers, from private clients right through to major institutions. We are the market leader in electronic distribution of these exchanges and still operate with the traditional phone-broked service too.

Jones: Let's say I have been an active investor for years, but I have just used my traditional stockbroker for buying and selling shares. If I want to start using CFDs, what else can I trade?

Foster Bowman, Idealing.com: You can do CFDs on any sort of underlying security. The CFD market started developing to meet the needs of institutional traders who wanted to avoid paying stamp duty. Now you can also trade a CFD on foreign exchange, commodities or bonds. But within the equity market, the most common CFDs are on FTSE100 or FTSE 250 shares traded on the London Stock Exchange.

Ian Jenkins, Cantor Index - We'll quote pretty much any share with any type of liquidity in the market. In addition to that, you can trade most financial markets in the world.

Jones: Is it similar with spread betting?

Ian Jenkins, Cantor Index: We'll quote pretty much any share with any type of liquidity in the market. In addition to that, you can trade most financial markets in the world - we stopped short of clean air futures and chicken broiler futures, there's not a big demand for that - but commodities, bonds, currencies, shares and indices are big trading products with us.

We've also added weather futures. There are political bets where you can buy and sell Tory seats or Labour seats, and you can trade interest rate decisions with us. We'll make a price on anything where we can get liquidity.

The CFDs, Spread Betting, Futures and Warrants conference

Jones: Is it similar with futures?

Ben Few-Brown, GNI touch: No. The futures markets are global, with global access through an exchange and cleared via a clearing house. So rather than operating on a counter-party basis on a market designed for the purpose of a football match or an election or something else, there are standard contracts that are globally recognised and are traded by an international client-base and brokerage houses.

Jones: And this covers all sorts of markets?

Ben Few-Brown, GNI touch: Absolutely - financials, commodities, energies and indices. A lot of these are also covered by the spread betters, but we wouldn't be covering the sporting markets or such.

Jones: It may be a bit confusing for somebody who hasn't done this before. Say he thinks, 'Over the next three months, we are going to see a big rise in the FTSE 100 because Bush is back in the White House and everything is rosy.' How does he put money on it - through a spread bet, a CFD on an index, an option or a futures trade?

Ben Few-Brown, GNI touch: You could do all of the above. It depends what you are looking for.

If you want a short-term trade over a trade figure or specific announcement, you are probably better off doing it in the futures market where you have got a tight market spread and these days a fairly competitive commission structure. If you make a profit you are going to have to pay some tax, but if you make a loss it is tax deductible.

The chances are that anyone who has got to this stage of trading has got some form of portfolio and may wish to consider this as part of the whole rather than as a tax-free bet. If you are going to trade in the long-term, it is a question of choice whether you decide to go for a spread bet and possibly pay a higher entry cost. Spread bets do offer extras you may feel are worth paying for, such as guaranteed stops and that sort of thing. But on the other hand, if you are looking for the best possible value you are going to get in the market, you are better off going directly into an on-exchange futures contract.

Jones: Foster, could you make an argument for doing a CFD trade on the index rather than a spread bet?

Foster Bowman, Idealing.com: You would want to use a CFD as opposed to a spread bet if you were trying to match up your after-tax profit and loss statement, especially if you were hedging.Let's say that you had some exposure to the FTSE or to a security maybe three years ago, and you have built up a large capital gain. If you dispose of that originating security, you are going to have a taxevent.

If you want to lock in that profit now without actually creating a tax event, you can use a CFD and know that your after-tax profits are locked in and symmetrical. If you were to use a spread bet, you would have to adjust your hedge ratio or know that the after-tax profits on one contract is going to be larger or smaller than the other one.

Jones: So the tax-free hook is useful if you are just doing out-and-out trading, but if you are looking to hedge against an existing portfolio then it really doesn't make sense because you can shift one liability against tax if it doesn't work out as planned?

Foster Bowman, Idealing.com: That's right.

Jones: But if you were going to do an out-and-out trade on the FTSE over the next couple of months, a spread bet would be the logical way of doing it?

Ian Jenkins, Cantor Index: I think the 40% tax break that you get - and let's be honest, everybody only trades if they are hoping to make money - just blows away every other advantage of every other product. It is absolutely huge.

Only this country offers such an amazing deal on tax, and you don't pay stamp duty either in the case of shares with spread betting. That's quite apart from the fact that most companies give you credit to go into the market.

It's a lot more flexible - you are able to trade whatever size you want in spread betting, whereas in futuresyou have standard contract sizes.

Spread betting has allowed pretty much anybody to enter the market. You can trade £1 a point on the FTSE with a guaranteed stop loss and that means £100 to enter one of the world's major indices. Guaranteed stop losses have helped a lot of people who otherwise wouldn't have been up for the sort of risk involved with futures and spread betting.

Jones: One of the reasons people get scared off products like futures, spread betting and CFDs is the fact that they trade on margin. People think this is risky. Could we explain what margin is?

Ben Few-Brown, GNI touch: Margin is a deposit against the trade that you are making, on a futures contract typically between 5% and 10% of the total underlying value.As an example, if you took the FTSE 100 index to, say, 4000 points, a one-lot contract is worth £10 per point which means we are looking at £40,000. The margin would probably be between £2,000 and £4,000,depending on market volatility at that time. Initial margin is really a sign of good faith to the market againstyour position. Should the market move, say, 5% against you that day, you are going to have to top it up because that margin has been eradicated. If it goes for you, you are in credit. Not everyone charges margin - it is up to the spread betting company or the broker.

Jones: So it's a way of getting more bang for your buck, whatever you are trading.

Ben Few-Brown, GNI touch: That is correct. If you went into the market and bought £40,000 worth of stock you would have to pay £40,000, whereas to trade a futures contract you only have to put up a small amount of money - call it 10% and that leaves you with £36,000 to do whatever you will with the rest.

Whether you are talking CFDs, spread bets or futures, it is a geared product and the person using the instrument needs to be aware of what his exposure to the market is - these exposures are multiplied,as are the potential gains.

Jones: It's the same with CFDs, isn't it? If I deposit £1,000 in a CFD account, depending on which company I do it with, I can leverage that money up and take a much bigger position.

Foster Bowman, Idealing.com: That's correct. The margin mechanisms work in most cases in a very similar fashion to the margin mechanisms in the futures markets.

Jones: You can see why initially people may be a little scared. If you are a cautious, sensible investor you probably use margin to spread your risk over a number of markets. But if you are a little bit gung-ho and want to make your millions by the end of next week, you can over-leverage yourself and a small move is going to wipe you out.

Foster Bowman, Idealing.com: That can be the case. A lot of people might use a CFD where they want to take a position in a single equity or a single company. Although there are some futures on single company stocks, the liquidity in the CFD market is slightly better. Some people like to use CFDs to take short-term positions if they think that bad news has caused the stock to overcorrect, for example.

Jones: But in the greater scheme of things, margin is a sensible thing if it is used properly. So what can your customers do to minimise the risk? Let's say I want to buy 10,000 Vodafone at £1.40 but I want to get out at £1.20. I'm going to have to put up perhaps £1,000 to do that. What can I do to minimise that risk?

Foster Bowman, Idealing.com: We usually require a stop loss when a client establishes a position, and it has to be within a certain range.

Jones: Is it the same with spread betting? Let's say I want to do a trade on the pound against the dollar - I think it is going to go to 2 so I want to buy loads but I don't want loads of risk.

Ian Jenkins, Cantor Index: A guaranteed stop loss would be the ultimate way of minimising the risk. But to be honest, there is an inherent risk in coming into these markets and I don't think any clients kid themselves that it is risk-free. It is the very, very top end of the risk/reward pyramid and you just have to stand up and be counted. A guaranteed stop loss does give it a finite risk and that's probably the best you can do.

Jones: So if I did a trade on Vodafone, even if it went bankrupt overnight, if I had a guaranteed stop loss I would be out at my specified price?

Ian Jenkins, Cantor Index: Certainly - this is one of the main things that spread betting has brought to the market. You can't lose one penny more than your guaranteed stop loss.

Ben Few-Brown, GNI touch: I'd add that we are all regulated by the FSA and it is our duty to assess clients and make sure they understand the risks they are undertaking.

Jones: Let's talk about how your clients trade. There's maybe a perception that you have to be sitting in front of your screen all day if you are using spread bets, CFDs or futures, and in and out 20 times a day. But many of our readers are medium to longer-term investors.

Foster Bowman, Idealing.com: We do have a fair number of day traders but we also have a lot of people who will use a CFD or similar product to establish an intermediate-term position. They typically have a stop loss on the position but they also have a take profit or a limit order on the position. They are seeking to reach their profit target within anywhere from two weeks to three months.

Jones: They are treating it like a short-term portfolio rather than straight in and out.

Foster Bowman, Idealing.com: Yes. Some people term it swing trading, we call it intermediate-term trading.

Jones: With the spreads narrowing over the last few years, spread betting has become viable for really short-term trading, particularly with the market volatility that we have seen. Ian, do you see mainly day traders?

Ian Jenkins, Cantor Index: It is the full gamut of types of clients with us, from people who do it intraday to those who hold some stocks and roll the product over for 18 months or more.

Jones: How about futures?

Ben Few-Brown, GNI touch: Again, we have a cross-section. From our point of view, the people who are trading a lot, the short-term traders, excite us. They are turning things around and we are earning commission from the trades. We also have plenty of customers who take long-term views, although the length of the trade isn't necessarily determined by them but by how the market moves once they have taken it.

But yes, the majority of the volumes done in the markets are done by the day traders. They like to see themselves as liquidity providers. They have taken the place on the electronic market of the old 'locals' on the floor of LIFFE.

Jones: Let's say I fancy trading some of these products and have opened my account. How can I actually place the trade? Is there any difference between trading over the phone and online? Do I get a better price or a narrower spread?

Foster Bowman, Idealing.com: You wouldn't get a narrower spread if you were trading online versus the telephone, unless you were attempting to do a very large trade which warranted what we call 'manual assistance' from us, almost acting as your agent.

If it is a very large trade, we might try to execute a hedge on the underlying market and work it for a while in order to get you a better execution. But in general, for the typical size of trades on CFDs and spread bets by individuals, on-line and telephone execution would be exactly the same.

Jones: Is it the same with spread betting?

Ian Jenkins, Cantor Index: Largely, but we have three ways you can trade with us: online, on the phone and also on an XDA - a hand-held PC and phone which acts as a trading platform. And we have in the past given smaller spreads on trials online and on the XDA. Largely though, it's the same spread whichever medium you use.

Jones: And which way do you see most of your clients trading?

Ian Jenkins, Cantor Index: Looking at the number of bets, there isn't a big difference between phone broking and internet dealing. If we are looking at size of bets, phone broking would dwarf internet dealing.

People who want to do size need a broker. Quite often they are coming on to do more than market size in shares and you can't do that on line, you need a broker on your side. You have the benefits of both with us.

Jones: And there is no extra charge to pay?

Ian Jenkins, Cantor Index: No extra charge at all.

Jones: Online trading of a sort has been around in futures for quite a few years, even before the internet revolution. Do most of your clients still want to speak to somebody and talk through a position, or are they happy to sit at home and trade the FTSE or whatever?

Ben Few-Brown, GNI touch: We have got both sides of the market, but by far the biggest is online trading on the major exchanges. The advantages are speed and cost. Clients pay a lower commission to trade electronically.

Not all exchanges are electronic, though, so you would have no choice in some cases but to be telephone-executed. If you are going to trade New York cocoa, coffee or sugar, say, they are still physically traded.

Jones: All our readers are familiar with the UK stock market and if they started trading CFDs or futures or spread betting, they would look at things like BP, Shell, Marks & Spencer and the FTSE100. What other things should they consider?

Foster Bowman, Idealing.com: Well, there are pair strategies they can look at. They may be using the same securities, but CFDs enable you to take a leverage position on the difference in price between one security and another. Normally, without leverage, the volatility of that spread may not be enough to make a profit. With CFDs, however, because you can leverage up 4, 5, 6 or even 10 times, you can afford to trade strategies such as that.

Jones: That would be like you go long Barclays and short Lloyds Bank?

Foster Bowman, Idealing.com: Correct - banking sectors are common pairs trading areas, as are energy sectors. Shell and BP, for example, is a classic pairs trade.A CFD is probably more appropriate if you are looking at individual stocks or if you need a certain degree of tailoring. As you move to trade in a product that offers diversification, a future is better - it is very difficult for a CFD on the FTSE 100 index, for example, to beat the liquidity of the FTSE 100 future.

Jones: Currencies have been in the news all year, with the dollar getting clobbered day in day out. The oil price has been going through the roof but has been coming off lately. What sort of things should people be looking at outside of normal share markets?

Ian Jenkins, Cantor Index - If you have the basic building blocks of trading, there is no reason why you can't transfer these over to another market

Ian Jenkins, Cantor Index: Our clients look for volatility in the markets and certainly this summer we saw a migration into oil and currencies. They are the two markets that have taken off this year.

If you have the basic building blocks of trading, there is no reason why you can't transfer these over to another market. A lot of chartists say it doesn't matter what the name of the chart is, all you are lookingat is the graph itself. And certainly since the movement in oil, our clients have been moving into commodities - cocoa, coffee, gold, silver, we are taking a lot of trade in those. You have to be a little bit quick on your toes as a client I think and look for the volatility.

Jones: And I can trade all these things through one account?

Ian Jenkins, Cantor Index: Absolutely - it is the most flexible way of trading.

Jones: The one point we haven't talked about today is covered warrants. This is a product that has been launched in the last couple of years and maybe appeals to people because of the limited downside. If you buy a covered warrant and it goes wrong, like an option the most you can lose is what you paid in the first place. How do covered warrants fit in vis--vis things such as CFDs and spread betting?

Foster Bowman, Idealing.com: The initial take-up of covered warrants was decent among private investors. Some of those have been complaining recently that the price compared with an equivalent product that might be traded on an exchange is too expensive. Our view, as a company that offers both covered warrants and other derivatives, is that if you are trading on a very short-term basis you are fine with a covered warrant because the spreads are pretty tight. But it is not something that you want to hold for an intermediate or a long-term position because there is a tendency for the prices to be too expensive.

When we have looked at the price of covered warrants on the FTSE100 or individual stocks and compared them with their exchange-traded counterparts, we have found them to be consistently anywhere between 3% and 10% more expensive in premium.

Jones: Let's move away from that and get back to the markets. I think there can be an element of confusion for the new spread better who wants to place a trade on, say, the FTSE 100. He sees on his website that index is at 4750, so he rings his spread better and asks 'can you give me a price for FTSE December?'. The spread better says '4765', and the client thinks 'ah, they knew I was going to buy and have moved it away from me straight away'. But when you are trading it, you are trading the future and not the cash index, Can someone explain why this is?

Ian Jenkins, Cantor Index: Apart from a couple of basket trades, you don't deal spot products, you deal a futures product. That futures product has to accommodate within its price the cost of carry, any dividends and any storage, so typically a futures price would trade above a cash price.

That isn't necessarily so at the moment with the low interest rates that we have but it would be the norm. Then over the course of the contract the futures price and the spot price become very, very close until on the last day at settlement they will essentially be the same.

Jones: By spot product, we mean the FTSE cash - the FTSE100 index that we see every day quoted on the news. It's a synthetic thing, not a real thing, and if you want to trade it, you trade a FTSE future via a spread bet or CFD, or direct in the futures market - that's why there is this difference.

But if you bought a FTSE future today and the FTSE cash went up 100 points, the FTSE future would typically go up 100 points, wouldn't it? We are going to see similar movements. Say the market is at 4750 and I think it is going to go to 5000: there is 250 points profit in this trade and I want to make £2500 if I am right. If I'm doing it via CFDs, how do I put that trade in place?

Foster Bowman, Idealing.com: On CFDs, it is expressed as a number of underlying securities. You would need to buy 1000 FTSE CFDs so that for every point that the FTSE moves, you will make or lose £10.

Jones: So I buy my 1000 CFDs at 4750, which means my exposure is going to be £47,500. What would I need in my account margin to do that trade?

Foster Bowman, Idealing.com: It depends on the broker, but let's say that the initial margin is set at 10% of the nominal value of the security. You would need 10 per cent of that nominal value, ie £4750.

Foster Bowman of IDealing discussing cfd margins

Jones: And if it gets to my 5000 target in six weeks, I can sell it out and I have banked my £2500. Now, let's do it by spread betting - what do I need to tell the company?

Ian Jenkins, Cantor Index: You need to say you want to buy £10 a point. You would phone up with the market at 4750, and the spread better would give you a two-way price. Typically at the moment, most companies are 4-6 spread in FTSE futures.

Just as if you were buying a share, he would make you a two-way price - eg 4747 to sell, 4753 to buy. If you thought the FTSE was going up, you would buy £10 a point - it really is that simple. The dealer says, 'Okay, Mr Jones, you're buying £10 a point on the December FTSE at 4753'. Then, every point it goes up you are £10 better off and every point it goes down you are £10 worse off.

Jones: Okay, and no commission, obviously, no stamp duty. What would the margin requirement be?

Ian Jenkins, Cantor Index: In spread betting we have a multiple called the notional trading requirement. For the FTSE, it would be something like 300 multiplied by your bet size, so you would need to put £3000 on account.

You could have a credit account whereby we waive the need for that £3000 and at the end of the trade it's just a cash settled trade, if you haven't been margin called in-between.

If you did £10 a point and wanted an upside of £2500 if it got to 5000, you could put in a guaranteed stop loss for which you pay a couple of extra ticks spread, indeed a non-guaranteed stop loss. So you'd buy at4753 and stop loss at 4653, therefore risking 100 points times £10, and all you'd need to put up as a deposit is £1000.

Jones: So if I put a stop loss in place, the margin gets reduced - that's very good. Let's talk about doing it in the futures markets then. Say I'm going to buy either one or lots of FTSE futures contracts, how do I do it? I want to make £2500 from a 250-point move.

Ben Few-Brown, GNI touch: Well, from the example you have given with the specific exit and entry level, it is very simple in futures because the contract is worth £10 a point. So to make £2500 on a 250-point move upwards, you would buy one lot of futures and when it moves up 250 points, you have made £2500.

Obviously there are other ways of going outside your parameters. Trying to make the £2500 at £10 a point means you buy more lots and your target is reduced. If you were to buy two lots, you would only have to see the market move 125 points. But that applies across the market whether it is CFDs, spread betting or futures.

Jones: Let's say I've read all this and I fancy the idea of trading these products, but all I have done over the years is buy and sell shares. How hard is it for me to open an account?

In the middle - Ben Few-Brown - GNI touch

Foster Bowman, Idealing.com: It depends on how long you have been buying and selling shares and what sort of frequency. There is also an element of discretion at the broker level in determining whether or not you qualify to trade these products.

Generally you need to be classified as an intermediate customer, which means you need to have a certain level of expertise, knowledge or awareness to trade them. I don't know of any brokers that activelypromote CFDs, spread bets or futures to non-intermediate clients, although they are notprohibited from doing so.

If you had bought and sold shares a few times within the last six months, I think most brokers would also turn you away. But if you have been investing for yourself for five or 10 years or day trading for a year or more, then it is likely that you will be granted an account.

Ian Jenkins, Cantor Index: We offer a big educational package as well, so it doesn't matter what your experience has been in the past, we would encourage you to come into a seminar, to go over the risks, to go over market movements, go over market strategies.

As long as you genuinely can afford to lose the money you trade with, we will take most people by and large. We really advise them to get the education but it is a relatively simple affair opening an account.

Ben Few-Brown, GNI touch: We won't allow people without any futures trading experience to go on line until they have had some over the phone futures experience. As regards starting to get futures experience, the share dealing you described would satisfy the criteria for moving on to futures. It is not impossible to start but we will insist that we are satisfied fully that your knowledge of the products is satisfactory for the trading you intend to do.

Jones: You don't want people to blow their life savings in one afternoon.

Ian Jenkins, Cantor Index: Before you can even set up as a company, the FSA will look over your account-opening procedure and it does spot checks on clients' files.

Jones: If I open an account and I can trade all these wonderful markets with these fantastic products, what else do I get? Analysis, charting?

Foster Bowman, Idealing.com: You get a trading platform and 'streaming' software, which makes the latest data and price changes continuously available to you - all you need to do is hit the refresh button on your browser. A lot of regular stock brokers don't offer this kind of service.

We don't offer internal research, we offer access to external research and the ability to monitor the proximity to any stops or take profit order that you may have in real time.

Ben Few-Brown, GNI touch: - We are acting as an agent to the market place and therefore have no axe to grind as regards discussing individual products.

Ben Few-Brown, GNI touch: With us, you will get access to internal and external research depending on the product. We don't research everything ourselves. We produce a daily early-morning commentary and news sheet on markets that our analyst thinks are interesting. Beyond that, we have arrangements with specific research companies we can arrange favourable deals with on behalf of our customers.

As regards charting, we do produce an elementary package for the private client but a number of our customers look for something more sophisticated and have their own arrangements. However, we have relationships with those companies and can arrange fairly favourable deals.

On top of that, we do have qualified brokers who have knowledge in specific product areas for the purposes of customer advice. We are acting as an agent to the market place and therefore have no axe to grind as regards discussing individual products and where they are going to move.

Ian Jenkins, Cantor Index: Already, private clients are being offered a service comparable to the top bank trader at Merrill Lynch - the limits, the stops, the trailing stops.

Ian Jenkins, Cantor Index: Clients are generally well catered for, whichever company they go for. Most companies provide a good level of research and charting, and that is certainly so in Cantor's case.The big add-on with us, I think, is the Cantor Mobile. A lot of the time people are busy, away from their screens, and just having access to information on the world's markets has proved invaluable to a lot of our clients. We have a 24-hour desk and given the precarious nature of the world you certainly need a broker with 24-hour coverage.

Jones: So if I wanted to, I could be trading dollar/yen at 3 o'clock in the morning?

Ian Jenkins, Cantor Index: Absolutely.

Ben Few-Brown, GNI touch: We have 24-hour coverage at GNI.

We are obviously only covering the exchanges and markets that are open at that specific time, but plenty of the US exchanges are open electronically for their out-of-pit hours and we are able to access them on behalf of our customers.

Foster Bowman, Idealing.com: We are available at any point in time that the underlying security markets are open.

Jones: Let's do a bit of navel gazing. The industry has come on in leaps and bounds over the last three or four years and we now have information at our fingertips that only five years ago would have cost an absolute fortune - streaming prices, real-time charts and all that. There are a lot of providers of CFDs and spread betting products.

What changes can you see in the industry over the next few years - additional markets coming online, say - or anything else that is going to affect us as private investors?

Foster Bowman, Idealing.com: I think we will see continuing trends towards more providers offering a broader selection of underlying securities and a broader array of products. It wouldn't surprise me if more of the CFD and spread-betting shops that don't currently offer cash equities started to do so, and if more cash equity shops don't start offering CFDs and spread bets.

Jones: So you think the CFD providers and spread betters will start doing the job of a normal stockbroker as well?

Foster Bowman, Idealing.com: That is a possibility. A couple of us here, GNI and I-Dealing, already do that. And eventually it just makes sense. It is true that a lot of the active trading is concentrated in the CFD and spread betting sectors, but if you are doing a lot of that execution and hedging in that market, then ultimately, you might look to offer the cash product to your client base as well.

Jones: Which will be great for us as users.

Bowman: Yes, you will be able to have one or two accounts where you keep and monitor all your risk.

Ian Jenkins, Cantor Index: It is probably good news whichever company you are with at the moment. There are going to be more whistles and bells added on to all products. Already, private clients are being offered a service comparable to the top bank trader at Merrill Lynch - the limits, the stops, the trailing stops.

Ben Few-Brown, GNI touch: We are going to see more exchanges going electronic. The US exchanges are being dragged kicking and screaming into this environment. I think we are going to find increased technical sophistication of the client base - more and more new customers coming into the market wouldn't consider trading over the phone, they expect to connect electronically.

Obviously the off-line broker is still going to exist because you have got to have back-up to your electronic connections, but in reality the majority of the business is going to go electronic and we are going to see the end of trading floors.

Jones: To wrap up, would you like to explain to readers why they should be considering these products - spread betting, CFDs and futures - if they haven't before, and why particularly with your firm?

Foster Bowman, Idealing.com: It makes no sense to trade UK equities in the cash product when you can trade in CFDs or spread bets, because with a CFD you get stamp duty exemption and with the spread bet you get capital gains tax exemption. Those are powerful economic pulls. On top of that, you get leverage and it doesn't make any sense to borrow money to buy a larger cash position in the UK equity when it just means you are going to be paying even more stamp duty.

That is the primary driver for using a CFD. At Idealing, our proposal is that in addition to just outright speculating, you can also hedge the portfolios that you have with us as a stockbroker.

Ian Jenkins, Cantor Index: The product sells itself and we have largely gone over that in this discussion. Why deal with Cantors? I think you want to deal with a company with a big capital base. We all know the precarious political backdrop to the world at the moment. We have seen companies, including big pension companies, really struggle.

You need access to the market 24 hours a day. Cantor Mobile is the way that a lot of our clients are choosing to stay in touch with the market.

But above all, we base our whole philosophy on customer services and approachability. Too many people are being kept out of these markets by market terminology and we to a large extent have wiped that away. We just want to encourage people to call up and ask us questions. I think the fact that we were voted best spread-betting service by readers of Shares speaks volumes.

Ben Few-Brown, GNI touch: As regards the product, futures, it gives the customer direct market access to global exchanges and therefore the liquidity of global exchanges, offering tight market spreads at an extremely low exit and entry cost.

Why GNI or Man Financial? First and foremost, when choosing any broker or company to trade with, people should consider the balance sheet and security of that company. There have been one or two well publicised failures in the past and often I don't think people necessarily consider that as a danger, but it is a bigger danger than probably the market moves.

Secondly, at Man Financial we offer all the products. We can cross-margin accounts forcustomers between futures, CFDs, FX trading and spread betting. We are independent in the market place, offer independent advice and have extremely experienced staff. We were probably the first broker to offer remote online trading, by which I mean customer-end order entry.

To conclude, although quite popular in mainland Europe for investors located in the United Kingdom, spread bets and contracts for differences are the more common offering through most brokers and definitely offer the widest range of markets. The ever-increasing number of brokers entering the industry also keeps spreads and commissions very tight, especially on the more popular and widely traded markets.