Change to UK Quarterly Share Bet Pricing Structure

 
Dear Client,

CMC Markets is constantly looking to improve its service to clients and ensure they are treated fairly. As part of this process we have reviewed the pricing structure of our UK Quarterly Share bets and will be changing how we price these instruments from 15th September 2006.

Currently, we calculate quarterly prices by building in the 'Cost of Carry' for the remaining days to expiry of the bet. Cost of Carry is the term for the expense incurred while a position is held and is made up of interest charges and dividend payments.

The main difference is the new method will not include dividends within the price calculation, but does include interest charges. Dividends will simply be applied to your account on the ex-dividend date as they are with Rolling Cash® bets.

Summary

Current Pricing Method

Price includes estimated dividend and interest charge.

New Pricing Method

Price does not include dividend but does include interest charge. Dividend applied on ex-dividend date.

To make things clearer, we have created examples of the two pricing options below:

These examples assume that ABC Ltd stock trades with an 8 point spread, has a mid price of 500p and there are 19 days remaining until the quarterly bet expires. The interest charge for quarterly prices includes the interest rate and the remaining LIBOR is currently 4.31%.

Current Pricing Method

Price includes:

Stock mid price
Interest charge (int rate x days till expiry)
Estimated dividend payment

 

 

500p
1.121781
10p

Assuming a spread of 8 points the price would be: 487 / 495

.........

New Pricing Method

Price includes:

Stock mid price
Interest charge (int rate x days till expiry)

 

500p
1.121781

On the ex-dividend date the actual dividend of 10p is applied to your account accordingly.

Assuming a spread of 8 points our price would be: 497 / 505

.........

The new method waits until the actual dividend figure is published and is then applied to your account on the ex-dividend date. This is more accurate and therefore transparent.

This change will take effect on the 15th of September 2006.

If you have any questions about this change, please do not hesitate to contact the CMC Markets Helpdesk on helpdesk@cmcmarkets.co.uk or +44 (0)20 7170 8205.

Kind regards
The Team at CMC Markets

.........

For quick answers to your account, software and dealing questions, please visit www.cmcmarkets.co.uk/help

 

CMC Spreadbet Plc is authorised & regulated by the Financial Services Authority.