Next tuesday: How to start a CFD broker with cTrader
Over the weekend I did one of those big clean outs where you get depressed at how much junk you own and start to wonder whether you should sell everything and move to a monastery.
As I was sorting through my stuff, I gave into the algorithm and put on a suggested video from the Soft White Underbelly YouTube channel. If you’ve never watched this, I recommend it as usually it makes for entertaining listening.
The episode I got suggested was with a former ‘adult entertainment’ talent agent. It’s worth watching the whole thing but basically the guy seems full of remorse and is against the industry he once worked in.
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Where am I going with this? Something he points out a lot in that interview is how pervasive the ‘adult’ industry is, and how permissive we are with it as a society.
This is a point you see made all the time when people cast aspersions on vice industries, like high risk trading or tobacco. Over the past couple of months I’ve seen people dunking on the trading industry, as well as some rumours that a mainstream UK outlet may be about to do the same.
The main criticism that these people have is that riskier financial products are too easy to access and people who don’t understand them get lured into trading them and lose money as a result.
But as I walked to the clothes bank to dump my stuff, I wondered – is that really the case? And compared to the adult industry, how easy (or hard) is it to access derivatives trading?
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Let’s find out.
The basic goal here is to sign up to a broker in the UK and get access to options and CFD accounts, then compare how long and difficult that process is compared to signing up and being approved to upload x-rated content on OnlyFans. My view – which you may disagree with – is that it should probably be more or as difficult to engage in sex work than access somewhat risky derivatives products. A crazy proposition I know.
Initially I tried to do this with Saxo Bank but then had to go for Sunday lunch. Alas. Annoyingly I could not delete my Saxo application to start the process again, so I did it with Interactive Brokers instead.
Now some readers may think this is unfair because Interactive Brokers probably won’t be the default firm for a lot of traders.
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However, Interactive Brokers are very popular and I don’t think it’s unreasonable to assume that a regular retail customer would pick them to trade with. For example, a lot of big affiliate sites – presumably because they’re being paid a lot – pump them as the top UK broker for a bunch of different investment products. I also see them named all the time on Reddit as a ‘got to’ broker. Nonetheless, I’m willing to accept that other providers may have given me a smoother onboarding. It is what it is.
The way to compare the two was based on…
- How long overall did the process take?
- How many clicks
- How many pages I had to click through, regardless of whether there were forms to fill in or not
- Number of risk warnings, contractual agreements, and T&Cs type documents
- Can I even get access to the products I want?
I know you’re all impatient so let’s go through those each and then I’ll explain the results in more detail.
1) Sign up process
The total sign up time for Interactive Brokers was 1 hr 8 minutes 33 seconds. I’ll explain why it was so long shortly.
For OnlyFans the whole sign up process was 12 minutes 02 seconds. However, this is just to submit all the documents. OnlyFans has to approve your ID and appears to do this manually. I typically write these on Sunday evening and on Monday morning my ID was rejected because the photo was not clear enough.
As we’ll see, I think the key difference here is that there are a lot of roadblocks in the sign up process with Interactive Brokers to make sure you know what you’re getting into and whether the products you want are right for you. With OnlyFans there is almost nothing. The bulk of the time is just doing ID verification. I also retook my photo three times, which slowed down an otherwise speedy process.
2) Total clicks
The total number of clicks for Interactive Brokers was 187.
For OnlyFans the total number of clicks was 43.
3) Pages and forms
For Interactive Brokers the total number of forms and pages I had to navigate was 33
For OnlyFans it was 8
4) Agreements and risk warnings
The total number of legal agreements and risk warnings for Interactive Brokers was 29
For OnlyFans there is one terms and conditions agreement you have to agree to.
The total wordcount for the Interactive Brokers legal agreements is 91,800
The total wordcount for OnlyFans is 5,964
5) Could I access the products?
OnlyFans: ID photo rejected after manual review, have to resubmit
Interactive Brokers: cannot access options trading, can access CFD trading
Is porn better than derivatives trading?
You may wonder why the process of getting access to Interactive Brokers was so long. A big part is just the level of information you have to give. That includes your source of funds, your net worth, your prior financial experience and knowledge, an ID and national insurance number, and more. I tried to get through these as quickly as possible but it still ends up being quite time consuming.
For OnlyFans, there is much less. They basically want ID verification and your address. That’s it.
However, another big part – perhaps the biggest part – of the Interactive Brokers application was getting access to options and CFDs.
I decided to be ‘more honest’ and not use AI or search engines to complete any questionnaires. I don’t know if that’s a reasonable or unreasonable move to have made.
Anyway, you cannot directly apply for CFDs in the sign up process for Interactive Brokers (or if you can, it’s not obvious how) but you can add an options trading account.
To get access to options you have to complete 10 questions. You then select what options products you want to trade, with four tiers of complexity. I completed the questionnaire and asked for the second least complex set of options products. Denied. D’oh. Guess I’m an options noob then?
At this point, I was 35 minutes in and considered giving up because I couldn’t be bothered to keep giving them more information. Where was your dad’s best friend when your uncle was born? What jumper did you wear most in April of 2009? Do you think Kenny Dalglish was better than the original Ronaldo? It becomes tiresome.
When you do complete onboarding, which takes a bit of time, you have to request permissions for access to CFD trading. This leads you to a set of five different questionnaires on options, futures, CFDs, margin trading, and FX trading.
My assumption was this was a quirk of Interactive’s UX and I only had to do the CFD questions to get access to them in my account. Wrong. You have to do all of the questionnaires for the products – 50 questions in total. For example:
An investor, with no other positions, sells short 200 ABC at $50 and sells 2 ABC Dec 50 puts at $7 each. If the puts are exercised when the market price of the stock is $40 and the stock is used to cover the short position, what would the investor’s profit or loss be?
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What was weird about this is I ‘passed’ the options quiz in this instance at an advanced level (or whatever language they use) but then didn’t for the other one. So I know enough about options to get CFDs but not options, I guess?
Then there are the legal documents.
One way to look at these is, the number of legal documents is irrelevant because no one reads them anyway. Alternatively you can say that the number of legal documents is indicative of how heavily regulated firms are, the huge number of rules they have to adhere to, and the extent they have to cover their ass because of client protection rules. For Interactive Brokers this is huge. For OnlyFans there is close to nothing.
As noted above, if you combine all the legal documents you have to go through to sign up with Interactive Brokers, the total word count is 91,800.
According to howlongtoread.com, the English version of Franz Kafka’s ‘The Trial’ has 86,847 words in it. The combined length of Interactive Brokers’ legal documents for retail trader onboarding is greater than the 20th century’s definitive work of fiction about the evils of modern bureaucracy.
In contrast, I was surprised at how little there is to stop you or warn you about ruining your life by signing up to be an OnlyFans creator. They appear to manually review your ID but that’s it and there is nothing in the onboarding process telling you that what you’re doing is probably a terrible idea that will have negative consequences over the long run. There were no questions about prior experience either.
Something else that happened which was quite funny, is that when you sign up to be a creator on OnlyFans, you are required to put in a profile picture, header image, and a written profile bio for account verification.
I put the TradeInformer logo as the header image and ‘x-rated trading’ as my bio. They made me take down both because they featured ‘prohibited commercial activity’. So you can do hardcore pornography on OnlyFans but trading content is a step too far!
Now in OnlyFans’ defence (not a phrase I ever thought I’d use) I guess there is much less complexity to what people are using their platform to do. Understanding what it means to take a position using a butterfly spread takes more brain power than it does to know what it means to be in the missionary position.
On the other hand, most people who trade CFDs do lose money but it is – in the grand scheme of things – not that much. In the UK, the latest research I’ve seen by Finder lists the average loss as £2,200. That is about a monthly minimum wage pre-tax salary.
That figure is also very likely to be skewed higher by some big accounts losing a lot. Is that great? Nope. But equally is it really that big a deal? I don’t think so. Taking a small financial hit is never great but it’s also not the end of the world.
In contrast, and without getting too into the weeds of an ethical debate, I think OnlyFans is much more corrosive to an individual’s wellbeing. Losing a small amount of money is bad. Dying inside is worse.
You could go ‘hey, but OnlyFans didn’t approve your account.’ Sorry, but having your account rejected after a 10 minute application process because of a manual review on a blurry passport photo, is not the same as having to fill out a questionnaire where you are forced to work out the P&L on some covered put option strategy.
The bottom line is that the idea that it is super easy for someone to sign up to a broker today and get easy access to derivatives trading does not seem to match with reality. It seems to be easier to become an adult entertainer than it is to access CFD and options trading.
No doubt there are companies with much faster onboarding times than Interactive Brokers. But at this point, you literally cannot get an account to trade complex financial products in the UK, unless you are lying to the provider by using AI or Google, without knowing what you’re getting into and the risks involved.
Some of the questions and the amount of legalise you have to go through might be a bit much but I am generally ok with the questionnaire type stuff though. If you can’t answer fairly basic questions about leverage, for example, you probably shouldn’t trade CFDs. On the other hand, I think if you can demonstrate that knowledge, the leverage caps on offer in the UK are too low.
