Plus500 Ltd is an Israel-based online provider of Contracts for Difference (CFDs) on Forex, commodities, indices, shares, ETFs and options. It has regulated entities in UK, Cyprus and Australia and the parent company is listed on the Alternative Investment Market of the London Stock Exchange (LSE:PLUS), having a current market capitalization of £695M.
Plus500 Review: The Good and the Bad
Among the first things one notices when trying to open an account with Plus500 is that they only offer one trading platform which is in-house developed and comes in 3 different versions: downloadable, web based and mobile. After you get over the fact that you won’t be trading on the leading MetaTrader 4, you’ll start noticing something different about the quotes and the spreads on display. Firstly, Forex prices have no fifth decimal, contrary to what has been the norm in the industry for the past several years. Secondly, the bid and ask are placed the other way around and thirdly the spreads are fixed, and quite high. For instance, EUR/USD and GBP/USD have a 2 pips spread while USD/JPY has a 3 pips spread.
How does it all work?
Above you can see how quotes are normally shown on the trading platform. It can be seen that because the market has just opened (Sunday night) the spreads are widened, an indication that we’re looking at real market quotes, unlike those offered by Plus500.
Plus500 acts as a market-maker, which means they are on the opposite side of your trades. The good thing is that you can’t lose more than you deposit and that you can use guaranteed stops. The bad thing, it opens a huge conflict of interest between the company and its customers.
The fact that a no deposit bonus offer is prominently advertised on the site gives me the distinct feeling that Plus500 resembles more a betting site than a broker’s one. With such a big conflict of interest – Plus500 winning when its traders lose – the reputation of the company and reviews from past and present customers become paramount. Unfortunately for Plus500, the majority of positive feedback seems to come from websites that have an affiliate relationship with the company. The fact that Google search results are swamped by these aggressive marketers is already a red flag – it signals the fact that target clients are unsophisticated people who don’t perform thorough due diligence. But reports from many unhappy clients have surfaced for example on Forexpeacearmy.com. These range from problems with profit withdrawal to allegations of quotes manipulation. The disconcerting fact is that none of them have any reply from a Plus500 representative.
Moreover, Financial Times editor Dan McCrum has started a series of articles (currently 25) which span a one year and a half period attempting to look at the company’s business model. The main findings are that significant client churn takes place at Plus500 which makes it rely heavily on affiliate marketing to constantly replenish its customer base. On the regulatory side of things, FCA issued a £205k fine in 2012 for reporting failures, more specifically, between June 2010 – November 2011 Plus500 conducted 1,332,000 reportable transactions, none of which were reported accurately and with 189,000 not reported at all. This might seem ancient history, but it’s exactly this type of behaviour that can give rise to complaints mentioned above. For the second half of 2015, most of the UK accounts were frozen by the FCA for additional client verification measures and the appointment of new skilled persons to oversee the business and its compliance with regulations.
In this context, I second Forexpeacearmy’s recommendation of using a very high level of caution when dealing with Plus500. The only 2 points where they can’t be faulted are: free and unlimited demo account; website available in 32 languages.