Here are some interesting facts about the spread betting world from the Financial Times' special report on spread betting
Spread betting used to be the exclusive preserve of plugged in City types. Not any more. Today doctors, lawyers and growing swathes of middle England are opening spread betting accounts with the aim of profiting from moves in share prices, gold, the price of oil or even pork belly futures.
Some spread betting companies now estimate that well over half their clients are from outside the City. Just a decade ago the picture was very different. Then the lion's share of all spread betters were professional traders.*
Figures from IG Index, one of the biggest spread betting companies and one of a tiny number with a stock exchange listing, indicate this growth is starting to happen. In its latest results IG Group reported turnover up 44 per cent for the six months to the end of November. Its shares are up from their listing price of 120p in April 2005 to more than 280p today, giving it a market capitalisation of more than £900m.
Cantor Index says it has had a 300 per cent growth in its client base over the past year with revenues and profits up 85 per cent over the same period. Other spread betting companies are reporting similar growth. Spread betting is seen as a natural progression from a retail investor in the stock market which is traditionally heavily populated by men. However, some have compared spread betting akin to poker which has a wider range of participants and where nearly half of the accounts are opened by women.
"At present, many firms modify their internal trading and hedging decisions in response to successful clients. This could become an issue for regulators."
"Spread betting remains a niche product, with an estimated 125,000 people active in financial spread betting, which includes CFD and binary betting"
"This is out of a total of 425,000 with financial betting accounts, according to a survey by Celent, a research and consulting firms."
A recent survey by Celent showed that average growth rate of 26% 'taking revenues from £200 to £500 by 2010. Another recent survey by E*Trade found that the average customer was a 39-year-old man living in London or the south-east and employed at an executive level.
"The FSA has taken steps to force the industry to take a more responsible approach to its promotions, particularly those targeting novice spread betters, by ensuring risks are not under-played at the expense of benefits such as winnings free of capital gain tax.
"Several years ago, it levied hefty fines on two established SB firms which had fallen short of these rules aimed at protecting consumers."
And here're the two releases by the FSA some years back
City Index Ltd fined £35,000 for misleading financial promotions
Cantor Index fined 70,000 for misleading spread betting promotions
I find this very interesting and new spread betting firms are likely to repeat these mistakes while on the hunt for new customers. Some might already have and haven't been taken to account.
Over the last two years the number of women opening derivatives accounts has risen dramatically, and is estimated to be growing at 10 per cent year on year. Women also now account for 10 per cent of all account holders - although the figure is far higher at some firms.
This interest is being reciprocated by the spread betting firms. Angus Campbell, head of sales at Finspreads, says female investors are a sought-after commodity.
"The best client for us is the one that survives for a long time," he says. "Women tend to be more disciplined investors, who spend more time over their investments, and that means a longer shelf life for them and us."
Mr Campbell says that on the whole women tend to be more cautious investors but that this is not necessarily a hindrance. "Spread betting is a leveraged product so it is risky but only as risky as you make it," he says. "Being careful about the markets you enter, using small stake sizes that fit your risk profile, and using stop losses can all reduce the risks."
Spread betting companies say that women trade in a more calculating, focused and careful manner than their male counterparts.
Simon Denham, managing director at Capital Spreads, says the fact his female clients outperform his male ones is down to the fact that men are too aggressive about their trading..
"Women tend to not risk as much on each trade," he says. "This gives them more room for being wrong. And their views also tend to be longer-term which gives them more stable returns."
In the UK spread betting has led the investment industry in providing investors with the opportunity to trade online. Currently almost all spread betting is internet-based.
According to a report by Mintel, the market analyst, spread betting investors are predominantly white, male, affluent and under 45, which tallies fairly exactly with the profile of other online product users.
In its recently published white paper on spread betting, the Cass Business School said that this group tends to be the early adopter of all new technology applications.
Although women may not be the first to jump on to the bandwagon, they have become enthusiastic users of internet-based technology. This is particularly the area for online poker, where women now account for around 45 per cent of all players, according to the Cass paper. Statistics like this are prompting the spread betting industry to question how it too can tap into this lucrative market.
Women's preference for online gambling - such as internet poker - over other forms of gambling is partly explained by the differences between conventional and online betting.
Online gambling provides all of the complexity and skill requirements of other forms of betting but in a safe and anonymous environment.
A Cass Business School report commissioned by Finspreads notes: "While adverts for CFDs and spreads focus on the macho, online gaming billboards have even included fluffy bunnies to appeal to the female customer."
Fluffy bunnies aside, the point about advertising is a serious one. If spread betting companies are to increase their female customers then they need to convince more of them that this is a viable investment product. Highlighting the fact that women have a tendency to outperform men in this field is likely to be a far more sensible and effective way to entice them as investors.
Mr Denham says finding the right approach to attract female investors is the holy grail of their marketing.
"In general most of our clients hear about us through word of mouth, and roughly 60-65 per cent of our clients are men. We're not sure where to use direct marketing to target women because as a spread betting company there are rules about where we can and can't advertise."
However he expects the number of female clients to rise. As little as three years ago women were around five per cent of his clients. Now, the figure is 40 per cent.
"As women take a greater share of take-home pay they will increasingly take more control over investments," he says.
"So we fully expect to see a time when 50 per cent of all our client base are women."