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"If the top end of the spread quoted by one company lies below the bottom end of the spread quoted by another, there is potential for arbitrage, in the sense of a riskless profit."
A spread betting company ('A') is quoting a spread of 200 - 205 for the closing price of NOD Electronics on its first day of trading on the stock market.
Bookie 'B' however is more cautious about the price NOD Electronics will fetch, and is quoting a spread of 177-182.
Jack the Arb grabs his phone and makes a £50 a point spread "up bet" with 'B' from 182, and a £50 a point spread "down bet" with A from 200.
Wherever the price of NOD Electronics will move in the days to come, Jack is guaranteed a profit of £900.
In practice, spread betting arbitrage opportunities are relatively rare. Most bets involve an underlying market and so all licensed financial spread bookmakers will try to make sure that their spreads reflect prices in that underlying market. Their spreads are likely to be very similar.
Most arbitrage opportunities open up on spread bets which are not based on an underlying market price, or that are based on an underlying market that is not open at the time. Examples of this include 'grey-market' share bets, and out-of-hours bets on the international financial indices. It pays to be on the watch-out :)
In both cases, bookmakers have to use their judgement about what the underlying market price will be when the market opens - and these judgements sometimes differ. On the other hand, spread bookies tend to watch each other spread carefully and when a gap does open up, they usually try to close it up as quickly as possible.
This means that an arb has to have an eagle eye, and be very sharp. The other anti-arbitrage action that bookmakers may take is to limit the size of bets that they allow known spread betting arbitragers to make.
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