Binaries - WRONG WRONG WRONG

[Guest Zero]

I am wondering if IG can clarify an email they've sent around today stating there will be changes to the way intra-day binaries (not end of day thankfully) are priced for the FTSE, Wall St., and Germany 30.  Instead of pricing them via an INDEPENDENT source (Bloomberg) IG are now pricing these intraday binaries (5min, 20min, hourly, 2hourly) via THEIR OWN INTERNAL pricing. 

 

I can't honestly believe this.  It is the definition of a bucketshop.  It is just not right. 

 

I am glad that the ASX is not included, and hopefully our financial regulator here would forbid such a practice.

 

Surely IG are aware of how this looks.  They set the price that a binary expires at, a binary market where they make the market.  Who would trust that?  I've watch their pricing long enough now on the ASX to know that it changes at whim, so I'd believe that the FTSE, Germany30 and Dow would be similar. 

 

I strongly encourage IG to ditch these proposed changes and keep it the way it is if they are wanting to uphold any integrity and honest reputation that they may now have, both with their current clients and/or potential clients. 

Even the fact that you've considered it and are basically implementing it is a serious negative. 

 

Sorry, I just can't believe that you are seriously doing this.   Hopefully your response to my negative feedback, and hopefully that of others, may restore any faith your clients have placed in you.

 

Cheers. 

 

[LukeM]

Hi ,

 

I hope you’re well.

 

I’ll be happy to clarify as I don’t think the email sent around was particularly well detailed. To re-assure you, we are not changing our pricing methods at all and we are still using the same independent settlement feed from the same stock exchanges as before, i.e. LSE, Eurex etc... As a result we can still verify correct/incorrect settlement prices using Bloomberg.

 

Previously some intraday binary settlements had to be manually input to the system by one of our Binary dealers after the binary itself had expired and settled. Which, as I’m sure you can appreciate breeds its own inefficiencies and potential for human error. What we’re planning to do is remove any dealer intervention in the settlement process and take whatever price is in the system at the expiry time. This new method should suffer from far fewer errors than the previous method.

 

There is only a slight change to the definition of which price is used to settle a binary, instead of using the tick on or after the stated expiry time, we will be using the tick our system has, as that is something that a computer can define and source reliably from the underlying exchanges simply and transparently.

 

So it might be easier to discuss with an example, let’s say you had bought a binary that says ‘Market XYZ to be above 100 @ 12:00:00’.

 

Under the previous ruling, if the price at 11:59:59 was 101 but then there were no trades until 12:00:05 where the price became 98, by the above definition of ‘the price AT or AFTER the stated expiry time’, as there was no trade bang on 12:00:00 our reference would be to the 98 print at 12:00:05 (providing that was the first trade post-expiry). Therefore in this example it would have caused the binary to settle as a loss.

 

By the new definition, using the same example above, as 12:00:00 occurs, technically the ‘current’ price in our system of market XYZ was 101 as this is the price that is in our as at the binary expiry occurs. So the binary under our new treatment would settle as a win.

 

Under both rulings, the pricing and settlement is completely independent and we can’t influence it, and we can also use Bloomberg to reference what this price was. It’s just allowing us to move into an automated system and away from dealer intervention.

 

I can completely understand your concerns that it looks like we’re going to try and manipulate our pricing or settlement however I hope the above explanation somewhat calms your nerves.

 

As always Zero, please let me know your thoughts as I can feed them back to the Binaries team directly!

 

Cheers,

Luke

[Guest Zero]

Hi Luke 

 

Doing fine thanks, and I hope you too are well. 

 

I am even better after reading your extremely helpful post here clarifying the changes to binary settlement.  Thanks for taking the time to explain that and for reassuring me that your present high standards are being kept or now being exceeded. 

 

I honestly couldn't believe you'd do what I misunderstood the email as suggesting, and am so glad that I was dead wrong in my reading of the email - sorry if I came across too strongly.  I almost took it personally as I am a serious fan of your binary market and hold it, and IG because you offer it, in quite high regard. 

 

I understand completely from your example how and why you are making the improvements, so thanks again for being kind enough to make this clear. 

 

I am happy too that you/IG are investing time in improving your binary product and overall service.

 

  Cheers.  Thanks again. 

 

Zero.

[LukeM]

, I'm glad to hear it! 

 

I would have been very suprised that we'd change the rules away from being completely transparent and verifiable! That would definitely be a step in the wrong direction!

 

Your reaction was completely understandable so no need to apologise, I'm just glad I was able to explain the changes in a slightly simpler way than the email that was sent out and clear things up for you.

 

Another victory for the Community and getting things sorted!

 

Cheers Zero take care!

 

[frazier]

Hi

This is the first time I've used this (or any!) forum so please forgive me if this post appears in the wrong place.

 

I've been trading the FTSE 5 min binary for just one week now with over 180 trades and I've noticed something puzzling. Several times when I've let the mkt run to expiry it appears to have settled in the money only to change within a second. This has happened only when one of the 3 trades (either the highest or lowest) offered was in the money, the other two already having gone to 98/100. It has only occured when the actual price  quoted (say 6123.0) was very close to the strike price say (6122.50). In the last 3-5 seconds the price has looked like confirming a win (lets say I bought at or above 6123) and furthermore when the expiry time was hit and the time 'declared' as , say 13:15:00 the price had moved to 100/0. So the trade was finished and was a profitable one  - until literally within a second or two at most, the price was reversed to 0/100 and it had become a loss.

 

When this first happened I thought I must have been mistaken but it has now happened at least 4 times with bets that should have been very profitable, having been struck at a cost of between 4 and 12. The latest example was at 9:00 am expiry this morning when I had sold at 90. It closed with each of the 3 trades showing 0/100 and showing the expiry time of 9:00:00 and then literally 1 second later switched to show 100/0. Interestingly this change after the settlement time has not yet occured in my favour.

 

Before calling IG I wondered has anyone else experienced this problem and I also thought it may be related to the above conversation.

 

Thanks

[Guest TimP]

Hi ,

 

As  mentioned previously, our markets do now settle automatically albeit with a slight change of procedure. However, we do still use an independent settlement feed, which we can use to verify any positions that you believe may have settled incorrectly.

 

Our trading team would be happy to look into trades you may be concerned about. You can find our Helpdesk contact details at the following link: http://www.ig.com/uk/contact-us

 

Thanks,

 

Tim