Tracking Errors

[Mickey]

1. How are prices set on the IG dealing platform in general?  The prices quoted seem to have a much wider spread than the real underlying prices.  They then change in ways not tied to the price of the instrument it is supposed to represent.

 

2. Are there specific times when prices are "reset"?  The price on IG seems to jump when no change has happened on the underlying.

 

3. What exchange is the price of Bitcoin on IG based on?  

 

Thanks.

[Caseynotes]

Hi .  See https://www.ig.com/uk/pricing-execution

[Mickey]

Casynotes - thanks.  Does not answer the question.  E.g. in the case of Bitcoin there are multiple exchanges where the prices differ widely.  There's not real way of knowing if the price is real.  The IG quote prices vary in a very wide band, not reflecting any particular exchange.

 

At the moment for example BTC section of the platform itself is down.  Charts are not showing and it is not possible to trade.  Fairly critical in a fast moving market.

[Caseynotes]

Hi .  Yes, different exchanges will be quoting different prices, an exchange is a group of people who have organised a market, and are totally dependant on who is participating in their market, there are many markets trading the same thing. Current price in their market will depend on their participants, who are willing to ask or bid. But the point is you are not big enough to trade on an exchange (for a seat at the table you need to be able to trade real size), you are a retail trader and so must use a broker to trade on an exchange for you. You can choose your broker but they decide where to place the accumulated trades.

 

Have a listen to this podcast, lots of good advice but within it Anthony discusses the sacrifices made when he borrowed heavily for a place on a New York exchange. This was as things were decades ago and has multiplied much since then.

 

https://chatwithtraders.com/ep-080-anthony-crudele/

 

 

[Mickey]

Casey notes.  That is not an accurate characterisation of Bitcoin exchanges, its participants and who can participate.

 

What is true is no one has yet explicitly stated the formula for pricing on the IG platform with respect to Bitcoin.

 

This contrasts with all other instruments which have a directly observable underlying and in the case of US stocks a National Best Bid Offer.

[Caseynotes]

Hi   I take your point re cryptocurrencies, but they are a new market and traditional banks and brokers are finding their way. Cryptocurriencies work outside the whole banking system and are paired (for trading) to a 'normal' currency eg. Bitcoin/usd.

 

As a retail trader you need to trade via a broker because you cannot trade directly on any exchange, You need a middleman (until blockchain is established), if you only want to trade one instrument look for a supplier who provides the best possible price for what you want to trade in, whatever that price is it wont be the exact (to use a supermarket phrase) wholesale price, time lag and small volume always mean higher price and a minimum position size for retail, so if you only want to trade one instrument consider a specialist broker but you have already mentioned large price disparity between brokers. IG boasts in it's garb that it constantly scans banks and exchanges for best prices in all it's 10,000 trading instruments. You decide. 

 

My concern is that as IG is not a specialist broker dealing in only a small number of instruments so when oh when are IG going to provide a market for retail traders in DuckDuckCoin? I'm still waiting

 

 

 

[Mickey]

Will be helpful if someone from IG can answer the below:

 

1. How are prices set on the IG dealing platform in general?  The prices quoted seem to have a much wider spread than the real underlying prices.  They then change in ways not tied to the price of the instrument it is supposed to represent.

 

2. Are there specific times when prices are "reset"?  The price on IG seems to jump when no change has happened on the underlying.

 

3. What exchange is the price of Bitcoin on IG based on?  

[Caseynotes]

Hi   while you wait for someone from IG to respond you should take the time to look at their web page re, IG pricing at,  

https://www.ig.com/uk/pricing-execution

 

What are "real underlying prices"? each market (exchange) has different prices, it all depends on who is participating and what they are willing to 'bid' or 'offer'.

 

IG are a broker who offer a market to retail traders who (by definition) are not big enough to participate (individually) on any exchange.

 

IG claims to use algos to constantly scan many banks and exchanges to constantly update best prices, but they, like all brokers if representing a retail trader, are always going to be 'a middleman'.

 

[Mickey]

The "best" price is a relative term.  The best prices are not what IG customers get because IG makes an additional spread relative to underlying exchange prices.  Brokers on those exchanges provide better prices, lower margins and lower interest rates.  This higher pricing is acceptable if there is a wider range of markets, better service or tax advantage through betting or CFD.

 

1. How are prices set on the IG dealing platform in general?  The prices quoted seem to have a much wider spread than the real underlying prices.  They then change in ways not tied to the price of the instrument it is supposed to represent.

 

* IG makes money on the spread, is all risk laid off to the underlying market by a computer or is a human IG broker / trader reviewing this and managing a book hence the sometimes wide variation?

 

2. Are there specific times when prices are "reset"?  The price on IG seems to jump when no change has happened on the underlying.

 

3. What exchange is the price of Bitcoin on IG based on?  

 

* IG's Bitcoin price and spread is not varying in a deterministic way relative to a consolidated feed of the top 15 exchanges by volume.  Does a human at IG set the price and spread and "rebalance" IG's overall book?

[JamesIG]

Hi Mickey, let me answer these questions for you. 

 

1) In the underlying market Bitcoin is traded on centralized and de-centralized exchanges, however there isn't a single best bid and offer. We therefore take the feed from a number of different exchanges, and take the best bid/offer quotes to provide the tightest spread. We then wrap an IG spread around these quotes. The spread can be wide for a number of reasons, however the most important to take note of is that you are dealing on a leveraged position. 1 Contract in BTC will be 100 coins, which is highly unlikely to be able to execute at the touch price. 

 

The price feed comes into the IG systems and is projected to all clients. The majority of times a client deals, they'll be matched instantly without human interaction. If a deal is particularly large, or it goes outside our pre-determined levels of exposure, then we may need to manually deal to get the best fill. 

 

2) The High/Low will update at 10pm, in the same way as FX. The actual 'tick' in the market will be printed basis the changing feed. 

 

3) We take a number of the largest and most liquid exchanges to offer pricing and execution, however in the same way as our FX offering, we do not provide these liquidity providers. 

 

I hope this provides some clarity.

Thanks

James