Plus500 Share Discussion Threads

[ltcm1] 02/4/2018 14:27

Thanks BGW1970 - It is purely my opinion, which might not be correct.

[bobmonkeyhouse] 02/4/2018 14:11

BTW ltcm is just a troll like rackers and like rackers is filtered. I do not think he is winnifreth from what I saw of his stupid posts in the past

[bobmonkeyhouse] 02/4/2018 14:08

It could be argued that it's their highly rewarded affiliates that are good at marketing online

[bgw1970] 02/4/2018 13:56

Easy on ltcm1 - anyone is free to post here, and giving your own opinion is understandable. He does also aver that this company is rather good at online marketing, which many here would agree with.

Consensus expectations are for 200k new clients this year. The company has said that they started the year at above the average run rate of 2017's 247k new clients. That would mean at least 62K if it continued through the first quarter. I reckon more like 85k.

[ltcm1] 02/4/2018 09:55

Well the 90/90/90 system is well understood by retail brokerages. You don't need risk controls when 90% of your clients lose 90% of their account in 90 days. You just have to get more clients. Which Plus seem to be very good at.

[sailing john] 02/4/2018 09:47

Market News Update

Crypto
Dukascopy launches BTC/USD

Fx March Trading
Down 0-14% MoM at CBOE, TFX Click and GAIN. But still above longer term average as Jan and Feb were record months for Fx trading.
See Leaprate for full stories

[aakash30] 01/4/2018 19:48

I wont repeat all the reasons highlighted by various people on this thread as to why they have way better return on capital and profitability metrics or you could just read their annual report

[ltcm1] 01/4/2018 12:41

It is true I have no numbers to support my belief but to me it seems a far more credible explanation than any 'black box' algo theory. Like IG and CMG have been around a long time so will have huge experience in managing their risk. It just isn't credible that Plus makes much bigger profits because they manage risk better.

Plus target a younger punter with their very well targeted marketing and these young guys love to trade forex on leverage because they are drawn in by the lure of becoming a full time trader, which is itself a fiction invented by the companies offering these services.

The marketing spend is absolutely huge with these operations as accounts get burned so fast and they constantly need fresh blood.

I repeat there is nothing wrong with the business model, poker and casinos work the same way and there are big companies in that field. Nor are they the only one.

[rackers1] 01/4/2018 09:11

I must add however plus500 is Israeli based and my good self don't touch those. Period.

[aakash30] 01/4/2018 08:30

ltcm1 - your understanding of Plus is quite incorrect. Their revenues are quite diversified across different asset classes. Your other statements are generalizations without any numbers. If clients accounts are burned so quickly how are >50% of clients with them for over a year?

[ltcm1] 31/3/2018 18:42

Some great posts about risk above.

However my understanding of PLUS500 is they are all forex. Why would they need to hedge when they have a large number of small trades plus their insanely leveraged clients are nearly always stopped out before the trades can breathe.

Their bigger profits are not the result of smart hedging systems but ruthlessly fleecing small over leveraged punters. This is why they spend so much on marketing, because client accounts are burned so quickly. It is the nearest thing to an online ATM.

I guess it is legal but the punters don't stand a chance. Plus is really an online casino not a financial product.

Not saying it is a bad business but this is how it works.

[bobmonkeyhouse] 31/3/2018 11:21

Looking toppy.

I dont like this horrible company

Watching closely

[davebdavid] 29/3/2018 16:34

Nice to read some intelligent useful information for a change.

[planelondon] 29/3/2018 15:25

Chucko1, I hear you when you say counterparty loss between institutions is very, very low. However, when it happens, it tends to prove fatal for one or both parties. Recent examples being Alpari, FXCM and Liquid Markets LLC.

There isn't just the risk you might lose the deposited margin you have on account at your counterparties through default. There is also the risk the counterparty demands further payment from you beyond what you have on your account, and your ability to pay.

Hedging adds another layer of costs and complexity, that in general can be avoided and is not really necessary for a large, retail CFD operator.

[planelondon] 29/3/2018 14:46

Chucko1, the points are from my own personal experience but you will, if you look carefully, find many of them, if not all of them in Plus500's publicly available information.

The other considerations when adopting a model that requires you to hedge is it takes up additional resources in bookkeeping, monitoring and cash management. It also takes up IT resources as you have to plug (and manage) your counterparty's API into your systems. You now have the additional risk of IT failure of the API and your counterparty's systems. Perhaps, security risks too.

And then, of course, there is one of the most important aspects of the policy to hedge, its very, very capital intensive.

As I said at the beginning, just best not to accept the customer trade if you're going to have to hedge it. Let the customer trade something else. Nothing lost but much gained by this strategy.

[sailing john] 29/3/2018 14:00

Some great posts about risk above. Spot on and I have nothing to add except that I don't think IG are that different to PLUS and others. The assumption is that they hedge quickly and that doesn't make sense nor may it be possible with some of their illiquid equities so they probably take on a similar risk value to PLUS before externalising.

One fact I unearthed recently was that IG Revenue as at November last year was split 5% Pro and 95% Retail! This surprised me as I thought they had Institutions trading as well as some very high worth traders. So in 2017 not much different to PLUS in this respect either. They are now encouraging retail Investors to register as Pro (subject to Reg hurdles) and have had some success with 30% rev from Professionals in most recent update. Why anyone would lose some of the Retail protections before they have to is beyond me but wdik.

PLUS will probably go down a similar route but I think they will differentiate themselves by giving essentially the same T&Cs to pros - notably negative balance protection - and why not as no change for PLUS just allows leverage to be extended back to pre ESMA proposals.
Anyway we shall see over the next 6 months!
GL - SJ

[chucko1] 29/3/2018 13:55

planelondon, in reading the 5 specific points, can I ask if they are your points or ones which have been represented by PLUS in any of their annual reports or similar?

Either way, I substantially agree although in actual fact, counterparty risk losses between institutions is very, very low. Such contracts between them are now largely either centrally cleared or margined (initial and variation).

But if it is the case that IGG hedge anything and everything, one might argue that they could become a greater competitor by learning from their competition and altering their risk tolerance. That said, they have been around a lot longer so it would be some shift to make such a change, I think.

[bgw1970] 29/3/2018 13:36

None of this is understood by published research, even on IG.

[planelondon] 29/3/2018 13:00

Yes, hedging destroys margin. It’s a cost paid by way of spread to the external counterparty. It’s inefficient. It fails to maximise ARPU. As illustrated within IG’s revenue performance chart, page 10 of the interim accounts.

There are better and more efficient ways to manage and mitigate risk:

1. Only offer trading instruments that predominately provide you with a balanced market.

2. Have a very large number of relatively small customers.

3. Don’t accept new customer trades, if you have to hedge the position. In all likelihood, the customer will just trade another product during this period, rather than trade elsewhere.

4. Adapt your marketing. For example, change the prominence of the instrument within the website and trading platform.

5. Adapt the product to make it less or more attractive by altering spread, contract size, leverage, overnight premium and expiry.

There are other, non-monetary benefits to this model too. Not just do you retain 100% of the spread your charge, you have zero market counterparty risk and Most importantly, you retain 100% control of the risk. This control is vital in managing black swan risk, as we witnessed during the USDCHF debacle in January 2015. Once you counterparty a trade you create different but, additional risks and obligations that you do not control, for which you pay a premium. Better not to take the trade, to begin with. If managed skillfully, it’s the better and more efficient model.

[chucko1] 29/3/2018 11:42

Hedging with an external counterparty destroys margin, but maintains risk neutrality. PLUS appear to have a rather better balance, only hedging once risk exceeds some limit for the risk type in question. Customer flows, when offsetting, preserve 100% of the margin and it is a game of statistics as to whether customer flows offset or are generally correlated. I have no specific knowledge about this, but I would suspect that their algorithms are finely tuned to these matters.