London headquartered and FCA regulated brokerage Financial Spreads has announced that it is going to change its policy regarding guaranteed stop orders execution. With many companies in the industry deploying similar solutions, the company has implemented two changes that differentiate it from its competitors.
The first change that the company is making is the introduction of a conditional fee to the guaranteed stop loss order. The firm will charge its clients the extra bit only when the order is triggered. While other brokers in the industry offer this option, they do require the guaranteed stop loss order to be in place since the trade is open. This means that if a client is willing to modify an existing order or trade, they cannot do so.
The company has also reduced its fees on guaranteed stops with the extra charges worth 3 points on stock indices, crude oil markets or the most popular foreign exchange pairs like the EUR/USD, GBP/USD, USD/JPY and EUR/GBP. Previously the company used to charge about 10 points. Guaranteed Stop charges on metals are 5 points, while for UK and US shares there is a 0.30% charge. For European shares the charge is 0.50%.
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Commenting on the announcement, the founder of Financial Spreads, Adam Jepsen, stated: “Investors should always bear in mind that spread betting, CFD trading and forex trading are high risk. With any investment it’s important to recognize your downside. Guaranteed Stops are a form of insurance and will limit your downside.”
“The great thing for clients about our new Guaranteed Stops is that they are a bit like only paying for your car insurance if you have had an accident. By not charging clients for adding a Guaranteed Stop to their trade, clients have far more room for maneuver and lower trading costs.”
Elaborating on the recent flash crash event, where a guaranteed stop loss order would have had a substantial impact, Jepsen explained: “Using a Guaranteed Stop would protect investors against a flash crash like we saw with GBP/USD on 7 October. However, a more common and realistic scenario is where a market might gap lower or higher over the weekend.”
“With the new charges it’s easy for clients to add a Guaranteed Stop before the markets close for the weekend. If the order is triggered once the markets re-open then the client only pays a handful of points for protecting their downside. If the order isn’t used then the clients can easily choose to remove the order when the relevant market opens again on the Sunday or Monday,” he explained.