4

BUSINESS

PLATFORMS THAT USHERED IN ‘TRADING

FOR THE MASSES’

Until quite recently, only highly trained

professionals could carry out financial

trading in regulated markets. All that

changed with the advent of trading plat-

forms to which users could gain access

from smartphones.

Some 1.8 million adults in the UK

started day trading on online platforms

during the pandemic, according to

research firm Consumer Intelligence.

Trading 212 became the most down-

loaded app in the UK in one week of Janu-

ary last year, while IG Index more than

doubled its active users between 2019

and 2022— from 178,500 to 400,000.

These platforms, which allow anyone

to trade once they have passed certain

preliminary checks, maintain that they

have “democratised” the stock market

for the masses, allowing punters to trade

their own money from home. For many,

it is a profitable source of income, but for

some, it can foster compulsive behaviour

resulting in huge financial losses.

In the City, financial trading takes

place in a highly regulated environment,

with safeguards against unacceptable

levels of risk. Those trading from home

are much more isolated.

Investors on the platforms are up

against not only professional traders, but

also complex algorithms that are built to

act on price fluctuations and patterns

and execute trades instantly. In such an

environment, even conventional trading

can be risky for a novice. But some of the

trading platforms let their customers go

even further — carrying out highly lever-

aged trades with huge potential down-

sides alongside the potential rewards.

These high-risk trades — mainly con-

tracts for difference (CfDs) and spread-

bets, a nearly identical product — enable

people to, in effect, make bets with bor-

rowed funds, multiplying potential

losses as well as gains.

Institutional investors and gambling

charities have expressed bafflement that

these sorts of trades are being sold to

people without after-care, debt-repay-

ment advice or signposting to addiction

support services.

“It is totally insane for these platforms

to offer these products [to the public],”

said Gary Stevenson, 35, a former inter-

est rate trader. “These are super-danger-

ous products, packaged as if they are a

sensible financial investment. It’s like

selling crack cocaine and pretending it’s

a protein shake.”

“THEY THINK THEY’RE THE WOLF OF WALL

STREET ... BUT IT’S A LOSER’S GAME”

From his home in east London, Steven-

son can see the skyscraper in Canary

Wharf where he used to work. In 2011 he

was Citibank’s most successful trader,

predicting long-term market trends in

It’s like

selling a

drug but

saying

it’s good

for you

1 OUNCE

FINE GOLD999.9

1 OUNCE

FINE GOLD999.9 0

20

40

60

80

100

120

WHY DAY TRADING IS DANGEROUS

1

That means your £100

allows you to trade on

£1,000 worth of gold. So, if

over the course of the day,

the price of gold rises to

£120 an ounce, you make

£200, instead of just £20.

Your win has been

exaggerated

You have £100 to “invest”

2

In a traditional trade, you

could spend your £100 on

gold. £100 would buy you

shares to the value of one

ounce of gold 3

You would own the gold

shares outright. If the price

of an ounce goes up to

£120, and you decide to

sell, you have made £20. If

the gold went down in

value to £80, you would

have lost £20

4

A Contract for Differences

(CfD) trade is different. You

don’t buy the underlying

asset, such as gold,

yourself. Instead, you (the

trader) and the broker (the

trading platform) make an

agreement to exchange the

difference in the price of it

between when the trade is

opened, to when it is closed

5

Here’s an example. You

have the same £100 to

invest, but instead of

buying a traditional share,

you buy a CfD. The broker

allows you to put forward

10% of the total value of the

share and they will lend you

the rest

6

Gone in

60

U

ntil he ended up jobless,

bankrupt and homeless,

Steven did not think he was a

gambling addict. In fact, he

didn’t even think he was a

gambler — he thought he was

a financial trader.

Like a growing number of

mainly male professionals,

Steven, an engineer, had

started day trading from his laptop at

home. What started as a hobby escalated

quickly, and before long he had 200

internet tabs open across three different

computer screens — constantly watching

the financial markets, he said, making

hundreds of trades every day.

He surrounded himself with graphs

monitoring the movements of the mar-

kets on a number of platforms simultane-

ously, opening so many accounts that he

barely kept track. He felt masterful, like a

“conductor in control of an orchestra”.

But Steven was not in control. He

stopped going into work so he could

trade all day; eventually, he quit his job.

His life became “a feverish, frenetic

game of mouse-clicking and window-

swapping and buying and selling”. He

started craving ever riskier trades. At one

point, he lost £10,500 in just 50 minutes.

Still, he didn’t stop.

“It didn’t feel that much to me because

I was on a quest to be a multimillionaire,”

Steven said.

“It was nothing, I’d pay it off down the

line. I was constantly looking for a way to

keep going.”

In the end, he lost everything. He lost

so much money trading — both on the

stock market and new cryptocurrencies

— that he went bankrupt and, for a time,

was sofa-surfing and begging on the

street.

Today, Steven is ten months into a reha-

bilitation programme for his addiction to

drugs, alcohol and online trading. The

programme is at Castle Craig, a private

clinic about an hour from Edinburgh.

Clinicians are in no doubt that some

“investors” — like Steven — are, in reality,

gambling addicts, and the treatments

offered are identical.

Online trading is widely conducted on

platforms such as IG Index, Trading 212

and CMC Markets. While they are

designed to enable legitimate activity,

they offer the kind of reward-centred ful-

filment loop that is attractive to those

with addictive personalities.

The new cohort of addicts is a small

but growing phenomenon. In 2016, the

Castle Craig clinic treated just three

patients who presented with an addic-

tion to online trading. Last year, that

number had risen to 54.

Some patients took part in regulated

trading on platforms. Others had become

addicted to crypto-trading, such as in bit-

coin — a practice that is separate and

unregulated. Other clinics and helplines

also report a rise in former “investors”

coming to them for help.

“These individuals call it investing, but

it’s a gambling addiction,” said Lee Roll-

eston, a therapist at a Priory clinic in

Chelmsford, Essex.

“People see the financial markets and

sports betting very differently; we see

them as the same.”

INVESTIGATION

MEGAN

AGNEW

Trading apps claim to

unlock investing for

ordinary people, but they

have bred a new class of

addict. Their rise poses

questions for watchdogs

interest rates. Today he is retired — and

worried. Since Covid, he is hearing more

and more from old friends who have lost

large amounts of money very quickly

trading at home via the new platforms.

“The people at home think they are the

Wolf of Wall Street,” he said. “But traders

in the City are, in general, not taking bets

on the short-term future of the market

because there’s no way you can predict

the movement. I was one of the most suc-

cessful and best-paid traders in the world

and I don’t day trade. It’s roulette.”

Those who engage in it might never

dream of entering a betting shop. Yet

Stevenson says that for misguided ama-

teurs, day trading in leveraged products

such as CfDs can be equally high-risk,

with the same euphoric highs and lows.

At Citibank, Stevenson was constantly

monitored by the risk-management

team, checking if he was trading errati-

cally or dangerously. He could look up a

lifetime of company data to inform his

decisions — intelligence that is fiercely

guarded.