matt_sb_101

@KoketsoIG That's a no then, it's not in the public domain. I will be writing to IG to request it to be more transparent about the inherent interest charge in synthetic forwards. The fact that you don't even have any kind of published policy on this is really bad for transparency / customer reassurance. Don't you have regulatory duties to be transparent about this?

I am trying to get a precise answer to my question please. I understand that the quarterly forward price on ETF spread betting is based on some kind of SONIA benchmark + 0.5% interest rate. Please can you explain which SONIA benchmark precisely? Is there a public domain site I could check to see what it is right now so I don't have to retro-calculate the interest rate? I think IG should be publishing this information clearly on its site (like it does for overnight funding costs) but in any event I would be grateful if I could get an answer.

@KoketsoIG are you able to help with a bit more detail? Thanks, Matt

Thank you but you've only answered half of my first question, not the full question. March June and September forwards all seem to be using a slightly different effective interest rate so are you using SONIA forward curves to price and (if so) is there a public domain source I could use to verify the approach? It's not just the overnight SONIA rate + 0.5%, I'm fairly sure. And on the second question: I would really like to be able to use distributing ETFs because there's a much better selection of those BUT I won't do it unless I can be comfortable that I will get at or close to the full dividend value. How is this achieved? You give very full descriptions of how it works on DFB bets but all we have on forwards is: "Dividend adjustments are already factored into the pricing of futures and forwards." How are they factored in? I would really like to understand in detail because otherwise I'm not sure how I can take out a long position on a distributing ETF forward and be confident I'm getting proper value.

I am interested in taking long positions on ETF forwards, but would like some comfort from IG around how the forward prices are calculated. I understand that forward prices are essentially equal to the CASH PRICE plus FINANCE COST minus DIVIDENDS (simplifying somewhat). Accumulation ETFs Accumulation ETFs take dividends out of the picture and so are easier to analyse. When I do so, the finance cost AER is coming out differently depending on whether I'm looking at March, June or September forward contracts. The AER is very slightly lower for Sept (~5.6%) versus June (~5.65%) versus March (~5.7%). How does IG calculate them? I understand that IG builds in something like a 0.5% pa premium as its cost of offering the spread bet facility, but what is that on top of? Where could I look up the underlying interest rate? Distributing ETFs In the case of a distributing ETF, how can dividends be accurately factored in? Isn't this ultimately a guess as no one can be sure what will be distributed over the next X months? I would really like to be able to trade distributing ETF forwards because that opens up a much wider variety of ETFs however I don't feel confident that I understand the calculation and it means there's scope for hidden costs. In my view IG should be as up-front about all of this as it is about overnight funding costs (which are illustrated with formulas / examples etc.) Matt

I am relatively new to spread betting, but finding it interesting to get to grips with. The strategy I'm using involves going long on selected index ETFs, on a long-term basis. In order to avoid high overnight fees I'm using the longest-dated forward positions I can buy (Sept 24 at the moment). I tried to purchase a position on VHYG (Vanguard FTSE All-World High Dividend Yield ETF) and got a pop-up saying I couldn't open a new position on that ETF, only close old ones. And sure enough if you dig into the Info section there's a tag "Non-leveraged only". My two questions are: 1. Why is this 'non-leveraged only'? It doesn't seem to be applied to many ETFs and there seems to be nothing obvious which links them. As if to make me more confused VHYL (the income units of the same ETF) can apparently be bought on leverage. 2. Why are forwards even listed on IG for an ETF which can't be leveraged? (Perhaps the answer is that VHYG was bettable until very recently and now needs to be listed to allow people to close positions?) Any grizzled veterans able to help me out? Matt