Here is a spread trading company in London that had the FSA Strict License and still finds itself in a jam
Generally the top firms in UK are pretty safe, this one was a newer and it showed
Pretty big news in London financial community


Logging into your spread-betting account in the morning can occasionally throw up an unpleasant surprise. Typically, this happens when one of your trades has been stopped out by some funny move in the Asian markets overnight. But clients of WorldSpreads got a nastier shock when they tried to access their accounts on Friday, 16 March.
"I was just starting a live trading webinar," says IC contributor Matt Shaw of www.financialtrading.com. "I was already broadcasting and I tried to get into my account, but instead got a message saying the firm wasn't taking any new trades and that WorldSpreads' own shares had been suspended. I hadn't got any positions running, but I had several grand in my account, and quite a few of my clients are in the same boat."
It has subsequently transpired that WorldSpreads hadn't ring-fenced its clients' money, as it was supposed to do. The company owed £29.7m to clients as of Friday evening, but was only holding cash of £16.6m. The £13m hole is now being investigated by the Financial Services Authority (FSA) and the police have been called in. While it was initially rumoured that a rival spread-betting company might buy what was left of WorldSpreads, the firm is instead to be wound up.
The good news is that WorldSpreads' clients can expect to get at least some of their money back. The first £50,000 held in each client's account is covered by the Financial Services Compensation Scheme. But, even though the financial watchdogs have said this is a priority, the timing is uncertain. "We're probably not talking days or weeks here, but months," said one industry insider to the Investors Chronicle.
The bigger issue is what the WorldSpreads case will mean for the spread-betting industry in general. "Make no mistake, this is a massive knock for the derivatives business as a whole," says Steven Mayne, director of EGR Broking, an advisory stock broker. "It's not just bad for the reputation of spread-betting firms – it doesn't make the regulators look great either. "First there was the MF Global case and now this. Frankly, it dents the public's confidence."
MF Global went under in similar circumstances to WorldSpreads in October last year, albeit on a much larger scale. The futures, options and currency broker is estimated to have had a shortfall of $1.6bn in funds owed to its customers. "Trading can seem scary enough to some people, as they know they can easily lose money by making mistakes," says Mr Mayne. But, while you can limit those risks with discipline, you've got no control over whether your trading provider follows the rules."
The industry's larger firms have been keen to stress that they adhere to the rules. "We always completely segregate our clients' funds," says Angus Campbell, head of sales at Capital Spreads. "We also make provision for all our clients' winning positions every night." IG Index – the largest spread-betting firm of all – says that it even segregates the funds of non-retail clients, which is beyond what the rules require.
Aside from such public assurances given by spread-betting firms, retail traders have to rely on the regulators in order to ensure the rules are enforced. "Spread-betting firms have to submit their accounts and capital-adequacy positions regularly to the FSA. But I suppose one would have to go further and see their bank accounts in order to verify their cash holdings," commented one industry source.