Index Trader July Final PDF.pdf


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IndexTrader:

No bailouts
for brokers
With the term ‘bailout’ being the
watchword of the moment, it is
unsurprising to find traders
applying it more to countries
than to their every day affairs.
But the fierce economic
storm playing out globally isn’t
just putting countries at risk,
it is also affecting companies.
Stockbrokers, financial institutions and banks are
not immune.
Over the past 12 months we have already seen the
collapse of Pritchards Stockbrokers, MF Global UK and
Worldspreads and this has had a domino effect
throughout the sector, affecting clients and business
partners who used white-labelled offerings from these
providers.
Despite this, we rarely see brokers marketing their
services by their financial standing or solvency levels.
This may well be because it doesn’t pull in the punters
as effectively as claims about the lowest spreads or the
highest number of product options. I suppose we can’t
blame the brokers for that.
However, the man on the street would do well to look
a little closer at the companies with whom he deals,
particularly given that the financial strength of some
providers can be considerably different to others.
It’s great for the industry and for consumer choice
that we have seen so many new start-ups in the trading
market in recent years, but it also means that investors
must be careful. In other markets, since the collapse of
Northern Rock and Lehman Brothers, organisations
have been keen to highlight their solvency ratios.
And yet, in the trading arena, investors are still too
keen to put their buckets of cash with providers without
doing even the basic level of due diligence. It is for this
reason that IndexTrader will be taking a closer look at
providers over the coming issues and encouraging you,
the reader, to do the same.
We would love to hear any stories about instances
where you have decided against trading with an
individual business and your reasons why.
It may sound like shutting the door after the horse
has bolted, but the noise on this important theme has
quickly died down despite three high profile cases in
rapid succession. If you think there is nothing to be
learnt from these companies, then think again. After
all, you can bet your bottom dollar that the 15,000
Worldspreads customers affected by the chaos will
have other ideas.

US employment
figures set to
remain weak
Employment data coming out of the US on Thursday (5 July)
will make for uncomfortable reading, according to economists.
The US Jobless Claims and ADP Employment reports have
been widely tipped to underline recent fears about the US
economy, highlighted last week in the Nielsen report which
cited slowing employment growth as American’s main reason
for a loss of consumer confidence.
The report found that consumer sentiment dropped five
points to “87” in the second quarter of 2012. A reading of 100
or less shows consumer pessimism about the US economic
outlook for the months ahead.
Within the report, it showed that just a third of Americans
were now optimistic about their job prospects for the rest of
the year.
Added to this, the US Labor Department last week reported
a hike in applications for unemployment benefit, with the
number of individuals on benefits now at a nine month high.
This followed the last non-farm payrolls declaration which
included a significant rise of the long-term unemployed – out
of work for 27 weeks or more – from 5.1 million in April to
5.4 million in May. This figure accounted for 42.8% of all of
those unemployed.

Joe McGrath – joe@index-trader.co.uk

Editor, Indextrader

2 | IndexTrader | July 2012

www.index-trader.co.uk