Spread is too wide on CFD. 550% wider than other platforms

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1

I hold Scottish Mortgage Trust (SMT) in the Invest section.

I wanted to use the CFD side to hedge my investment if things go south again so I swapped over to CFD to check out SMT and do a few practice trades.

However I was just looking at the spread… it’s too wide. I double checked IG to see what they’re offering:

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Is this due to the feed providers or what? I know spreads are wide if there’s low volume, but does IG get more accurate data?

All my trading is done in the T212 universe and I’d like to keep it that way, but why would I use T212 to hedge if I get better value elsewhere? I know the spread is only a matter of pence, and T212 has to make money from the spread which I don’t mind paying, but let’s put it this way: it’s 550% higher on T212.

I have marked the buy price and sell price below. It’s basically this mornings open price vs current price.

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Am I being unreasonable or is this spread just too wide?

2

Spread will be wider here if no-one is trading here I am pretty sure of

3

Do you mean if nobody is trading here on T212?

Here’s a quote from T212 staff on another thread:

“We have what is called a floating spread - meaning that it reacts to the current market conditions such as volatility and liquidity”

I don’t think it has anything to do with what we’re doing on the app.

I’ve compared a few stocks now between IG and T212 and from this small sample size the spread is generally 400-500% larger on T212.

4

Yes, the spread is adjusted dynamically by mechanisms that react on market movement and incoming data - the logic being followed is universal for all the instruments - raw spread gets an X% mark-up and outputs the spread that you see and can trade on.

5

After digging a bit deeper, I’ve found that IG charge a fee per CFD trade. Which is why their spreads are tighter. They make money from the fee rather than the spread. Which I guess explains the difference.

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6

@pipo is correct. For example, IG charge for CFDs on UK shares ÂŁ10 plus 0.10% of value. So even a small position will cost ÂŁ20 to open and close. On US shares it is $10 plus 2 cents a share. Which is cheaper may depend on the size of the position you wish to take.

Perhaps one can draw some conclusion from the fact that IG quote exactly the same figure of 76% as do Trading 212 in their risk statement about the % of client accounts that lose money over a year. But Plus 500’s figure is 80.5%. City Index states 74%.

7

So glad i found this post as i was annoyed about Huge spreads in the past week for example NTFX, CRM, CVAC NEX, now understand why T212 find their 500%+ spread acceptable.

For info purposes as we’ve discussed this in another thread
@Lewdy @Supraman @PorterOldSlug @phildawson @obrienciaran @ffp3_mask @Dazzler

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8

Yeah that explains why there may be a 1 or 2 % spread, doesn’t explain a 15% spread though.

9

@Lewdy @Hectares

It’s actually 1570% wider than the official price from the London stock exchange. I was just checking the prices today.

Spread on LSE is 1 pence.

Spread on T212 is 15.7 pence.

I understand the need for a markup, but this is pretty ridiculous.

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10

David/T212 replied regarding the wide spreads: “Spreads are marked up with a set %, we don’t tinker with them ourselves. If raw spread goes up, our does too, if it goes down, so does our”.

T212 CFD is not a long term option, its not worth the cost, or limited instruments. This forum has been an eye opener for me.

Much appreciated for sharing the information :wink:

11

That’s true, and on any platform. It is good for day/swing/FX trading.

12

It is apparently good to use for hedging your investments. Not long term. Maybe a day or two, like this crash. Short the hell out of your own stocks.

However I just can’t do it as the spread is too outrageous. I would lose money shorting it in a crash believe it or not.

13

@pipo That’s the downside for using a “free” sharedealing platform.

Volume (per Month) 1 IBKR Commission per Share (USD) Minimum per Order (USD)
<= 300,000 0.0050 1.00
300,001 - 3,000,000 0.0045 1.00
3,000,001 - 20,000,000 0.0040 1.00
20,000,001 - 100,000,000 0.0035 1.00
> 100,000,000 0.0030 0.65
Example

If you execute 500,000 US Share CFDs in a month, your IBKR Commission would be USD 2,400:

300,000 CFDs at USD 0.0050 = USD 1,500

200,000 CFDs at USD 0.0045 = USD 900|

14

Very much this, anything longer than ~week wanting to go long then its the invest platform.

Where the balancing comes in, T212 is brilliant for practicing with small values specifically because it doesn’t have per trade fees.

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15

I should have made my comment more clearer, T212 CFD platform is not for long-term use: meaning the company/T212, due to the cost involved it is cheaper to pay Share and Trade fees.

Obviously CFD Trades in general is not longterm.