Newspaper article The Evening Standard (London, England)

Billionaire Brothers Join in Craze for CFD Trading

Newspaper article The Evening Standard (London, England)

Billionaire Brothers Join in Craze for CFD Trading

Article excerpt

Byline: MICKEY CLARK

MARKET REPORT

TRADING in contracts for difference is booming and brokers estimate it now accounts for around one-third of total daily stock market turnover.

Spread bookies say it is now one of the fastest-growing parts of their business.

CFDs have several advantages over the cash market. They enable investors to get a physical holding in the shares of various companies by way of a geared position. That gearing varies from broker to broker and often depends on the open position in the shares.

In other words, when an investor buys, say, 50,000 shares in UK Plc worth 100p each, the gearing on that deal may be 10 times, which means they cough up [pounds sterling]5000. The trader then goes out and buys the physical stock and investors have to bear the financing costs of the transaction.

Investors do not have to pay stamp duty and it allows them to remain anonymous, making it more difficult for companies to trace stakebuilding in their own shares.

Stakebuilding via CFDs is said to have been behind the recent flurry of activity in leisure groups Whitbread and Rank, which have both been trading close to their year high.

Word is billionaire brothers David and Simon Reuben have built small stakes in both via CFDs, lending weight to speculation that they may soon bid. They are said to view the stakes as an investment but would not rule out becoming involved in any subsequent break-up bids. Both Rank and Whitbread are said to have been targeted by private-equity companies such as Cinven, Permira and CVC.

The Reubens made their fortune trading aluminium in Russia. Last year, they bought the Wellington Pub chain from Sun Capital and Hugh Osmond and they own Millbank Centre on the Embankment.

The profits alert from Cadbury Schweppes caught the City on the hop. The company was forced to rush out a trading update just a couple of days before a two-day presentation to analysts in Texas.

Chief executive Todd Stitzer said revenue growth would exceed expectations but rising costs would eat into margins. He blamed the soaring oil price and disruption caused by hurricanes Katrina and Rita. …

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