FP Markets DMA Spread Betting
FP Markets have combined the benefits of Direct Market Access (DMA) and Spread Betting to bring you the ultimate trading product – DMA Spread Bet.
We offer both retail and professional clients the same functionality as DMA CFDs so that you enjoy the advantages of price transparency, the tightest spreads and absolutely no re-quotes. The bet is still placed between you, client and us, FP Markets, however our platform directly mirrors the underlying market and all bets placed will be automatically hedged in the underlying market.
This means that we do not look to profit from widening spreads or from client losses, though rather a transparent 'bet fee' is charged which is based on the value of your bet. This ensures that we are focused on giving you the tightest pricing on every product with the additional benefits of no Capital Gains Tax or stamp duty*. Our business model is not to profit from client losses, though rather to aligned interest and give you every opportunity to make money in the market. Unlike most traditional Spread Betting providers, all orders are automatically hedged.
Why DMA Spread Bet is Rarely Available
One of the main reasons why DMA Spread Betting has not been so prevalent in the markets to date is due to the 3% betting duty which a firm must pay to HMRC on ‘net client losses’ over a quarterly period. This charge is traditionally covered from widening spreads and as a result of a firm profiting from client losses. Rather than focusing on profiting from client loses and/or increasing spreads we have chosen to provide our clients with DMA prices and have clients who result in the firm incurring a betting duty contribute some of this obligation.
What FP Markets are doing Differently
FP Markets offers DMA Spread Bet by providing a model whereby profitable clients who are not responsible for incurring the duty for the firm don’t pay for the duty and loss making clients that result in the betting duty being incurred contribute to paying this duty via a small ‘bet charge’. All clients will enjoy the benefits of DMA Spread Bet functionality; however losing clients will incur a bet charge of 1.8% of their ‘net losses’ over a calendar quarter.
Further information on the betting duty can be found on the HM Revenue & Customs website www.hmrc.gov.ukx. The most significant point to note is that all Spread Bet providers are required to pay 3% of the ‘Net Stake Receipts’ of client losses if they are to offer tax free trading ‘Spread Betting’. FP Markets must also pay this betting duty to HM Revenue & Customs in order to offer Spread Bet. The difference between FP Markets and other Spread Bet providers is that we are focused on bringing you the tightest Spreads available rather than looking to profit from client losses and widening spreads in order to cover the betting duty.
The Notice 451 General Betting Duty provided by HMRC is available for further information.
Profitable clients do not pay the duty and receive the benefits of the tightest Spreads available and also receive the benefits of tax free betting. Clients with loosing positions may also still be better off even after the bet charge due to trading on the tightest spreads available and been given even opportunity to make money in the market. This comparison will depend on turnover, size of any betting loss and alterative Spreads that otherwise would have been paid.
Further Information about the 1.8% Losing Bet Charge on Net Losses over a Calendar Quarter
In bringing clients fair and transparent prices, FP Markets use an alternative hedging model to many providers in the industry. As our hedging model is focused on providing you with the best available prices as opposed to making money from client losses, we find ourselves in a position where we are subject to a duty of 3% of the ‘Net Stake’ of client losses over a calendar quarter, payable to HM Revenue & Customs, which we, as a firm may not have made from client loses. Rather than changing our hedging model to cater for losing clients and the betting duty payable, we have chosen to continue to focus on providing clients with the best available prices and have clients who result in the firm incurring a betting duty liability through losses contribute to some of this potential obligation.
The losing bet charge payable on client losses is calculated on the ‘net losses’ over a calendar quarter. This means that if, during the quarter you initially lose £10,000 and later in the period have a win of £10,000 (giving a net position of zero), there will be no losing bet charge to pay. If however, you were to place one bet only for example, and loose £10,000, you would be liable for a losing bet charge of £180. (Calculated as £10,000 x 1.8%).
Clients that make a profit or break even over the quarter will have no bet charge to pay and have the best of every world – best pricing available, no bet charge to pay and winnings will be capital gains tax free.
The bet charge calculation period starts at the beginning of each quarter and is calculated as all your wins minus your losses over the 3 month period. At the end of the quarter, any net losses will be settled and a new quarterly calculation period will commence and again any losses will be off-set by wins to determine if any bet charge will be payable. The losing bet charge will be accrued daily on your statement.
The Quarterly Periods for the purpose of calculating any bet charge which may be payable as a result of any ‘net quarterly losses’ are as follows:
- 1st January to 31st March
- 1st April to 30th June
- 1st July to 30th September
- 1st October to 31st December
Please find examples on this website to illustrate when the losing bet charge is and is not payable.
* Tax treatment depends on the individual circumstances of each customer. Tax law can change or may differ in a jurisdiction other than the UK.