Spread betting has thrived since the dotcom crash. The concept was launched by Stuart Wheeler who in 1974 founded IG Index so that investors could punt on the gold price without all the expense of buying bullion at a time of penal exchange controls. Popular spread bets were originally based upon performances of the Financial Times, Dow Jones Index and other financial barometers. The purpose was to hedge investment positions and the betting was largely confined to those in the financial community.
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City Index joined the market in 1983 and several others such as Financial Spreads, Cantor Index and Spreadex opened shop during the dotcom boom. There are now over a dozen firms offering spread betting services in the UK. Check Providers and Spreads in Retrospection.
As the table below shows, the financial betting industry is poised to grow at a CAGR of 26.33% between 2005 and 2010. A report last year by the Cass Business School predicts that the number of people in the UK with a spread betting account could more than double from its current estimate of 125,000 - 183,000 active spreadbettors to one million by 2012. Spread betting in Ireland is also on the increase.
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There are now over 20 spread betting providers in the UK, and fierce competition has driven spreads down. A decade ago, the spread on a benchmark index such as the FTSE 100 index was around 10 points. Today it has fallen to around two. Consolidation rumours are constant, but most believe that the market is growing sufficiently to support this number of providers.
Over 400,000 people in the UK have a spread betting account, and the majority of the traders, currently, are male. Spread betters tend to be self employed individuals or those working in the IT and finance and insurance sectors. Who uses spread bets and what markets are available?
Spread betting appeals to the same kind of market as CFDs, namely experienced traders, active in the market who understand the risks associated with margins and gearing. Much of spread betting consists of short-term trades, volume-based, high volume day traders coming in and out of positions. Read more about our findings here
Experienced traders all spread bet for the simple reason that if they can make £10,000 from spread betting, then they can keep £10,000 spread betting, rather than handing over a significant proportion of it to the taxman.
I am going to be 100% honest with you. I don't want you to think that at any point you have been mislead at all. I want you to read and be aware of the following before we go any further:
You will lose money as well as make it. Most professional traders will make on average 6 loss making trades out of 10. The important thing to remember is that the 4 winning trades make much more money than your losses.
Financial trading is not for the unemployed, anyone on a low income, who can't afford to live - let alone afford to invest in their future as regards Financial Trading. You need at least £100 to start trading - money which you can afford to lose and is not 'ear marked' for anything. This is for serious people who are willing to take a small calculated risk, not for the shy or weak - no complaining or writing to TV programs should you lose your money.
Financial Trading is 'Highly Geared' - you can win and lose money quickly. The good news is that there has to be those that lose and those that win. This is a 'Zero Sum' game - the money you will make has to come from somewhere.
Note that if you're an American you cannot participate in financial spread betting (unless you create an offshore company) because sites like Capital Spreads are highly regulated by the British Government (specifically, the FSA) which does not allow these sites to violate the U.S. laws prohibiting Americans from trading derivatives outside the U.S. Yes that's right...you're the only western industrialized nation that prohibits its supposedly 'free' citizens from speculating with your money offshore as you see fit. Call it protectionism by the CFTC, call it 'big brother,' call it whatever you like; it isn't right. If you are from the US you simply have to consider taxes as a type of 'slippage' that you as a trader in the States need to overcome with better 'edges'...
There are a number of established spread betting companies in the UK and Europe, backed by fairly reputable and large bookmakers. You may need a local mailing address in order to open an account with them. The most popular include Capital Spreads, IG Index, City Index and CMC Markets.
ProSpreads (for scalpers)
Capital Spreads is a division of London Capital Group and authorised and regulated by the Financial Services Authority (FSA). The company has a European passport and is a member of the London Stock Exchange. London Capital Group Ltd also has access to international markets through its global clearing relationships.
Capital Spreads aim to provide the best value spread bets you’ll find. In fact it is interesting to note that in a recent survey Capital Spreads achieved the highest satisfaction rating of all UK brokers in relation to spread value offered, with 89% of those surveyed responding that Capital Spreads offers either 'Good' or 'Very Good' value (Investment Trends 2009 UK Spread Betting and CFD Report). Minimum stake starts at £1/€1/$1 a point and most markets are covered including indices, shares, currencies, commodities, bonds and interest rates. Or if you’re new to spread betting you can take advantage of their free demonstration account (click link and choose 'Learn to Spread Bet' tab at the top to create a demo a/c) which offers a choice of products while mirroring the functionality of their live trading platform.
ETX Capital is a wholly owned subsidiary of Monecor (London) Ltd, which was launched in 2002.
ETX Capital has just launched a new platform which seems much better that it used to be; sure the spreads may not be fantastic but it is very easy and simple to use.
ShortsandLongs is a new provider but the company is part of Spreadex which has been around since 1999. ShortsandLongs is innovative in that it offers tights stops coupled with free guaranteed stop losses.
Launched in 1999 by City dealer Jonathan Hufford, Spreadex offers both sports and financial spread betting and the company is especially renowned for its tight margins and friendly dealers.
Paddy Power's financial spread betting venture, Paddy Power Trader was launched in the summer of 2007. The betting firm's newest business division claims to have 50pc of its customers in the Republic of Ireland and the remainder mostly in the UK.
Established in 1974, IG Group consists of IG Index (spread betting) and IG Markets (CFDs) and is now a public company listed on the LSE as IG Group (IGG.L). IG Index employs around 500 employees and has offices in the UK, Australia, Singapore, and more recently Germany.
The London-based division of the leading U.S. firm, Global Futures & Forex, Ltd., has been established to offer spread betting, contracts for differences and spot forex trading services to active traders, hedge funds and institutions in Europe, Australia, Asia and the Middle East. GFT Markets UK is the sister company of the leading U.S. forex dealing firm, Global Forex Trading (GFT). It is the venture of Gary L. Tilkin, a reputable global commodities and financial services entrepreneur, and the founder and CEO of GFT.
ProSpreads is owned by London Capital Group, who are a listed company on the London Stock Exchange, who also own Capital Spreads and Capital Forex. They are based in Gibraltar and regulated by the Financial Services Commission.
ProSpreads (formerly known as Futures Betting) provides experienced traders and scalpers with a professional trading platform that offers fast and reliable financial spread betting execution on major indices, currencies and commodities. The platform is aimed at individual professional traders as it offers unique DMA (Direct Market Access) functionality which is unavailable on other spread betting platforms.
Sporting Index, one of the market leaders in sports spread betting, established Financial Spreads (aka Finspreads) as its financial spread betting operation in April 1999 by recruiting five traders and a back office team from within the industry.
Online dealing was introduced in February 2001, providing an alternative to Financial Spreads' established telephone-based operations. Since then, the business has seen betting volumes increase rapidly as clients have been attracted to the Internet as a distribution channel.
In May 2002, Sporting Index decided to concentrate on their core business and sold Financial Spreads to IFX Group PLC for £8.7 million. In Mid-2006 IFX Markets (which operates Finspreads) was acquired by City Index in their quest to consolidate their position in the industry (Finspreads having a significant client base.) and expand their business horizons and thereby both City Index and Finspreads are now subsidiaries of City Index Holdings Ltd. The two companies are now under the same roof and share the same office floor and systems so although retaining the name...it is all City Index driven. In addition to spread betting, IFX deals in FOREX, CFD's and commodities. The Group is a member of the FSA, and, for the purpose of spread betting, holds a bookmakers' license. Finspreads, now part of the City Index group, claims to have 28,000 clients on its books making well over one million trades a year.
Finspreads, a division City Index Ltd. |
City Index started back in 1983 and were among the first companies to offer spread betting alongside IG Index. They are based Finsbury Circus in London, in the same building as Intercapital Plc, their parent company. The CityIndex site features a free trading simulator which is sure to be useful for those of you who just want to test the platform
City Index offers a comprehensive range of spread betting products and instruments, including UK, European, US and Far East markets, currencies, commodities and individual equities through its real time trading platform. Financial tools such as a charting package, technical analysis, heat-maps, markets research and an options model are also available. All bets are made in sterling with small stakes and limited risk bets available on certain markets. The online trading platform is updated every second.
City Index is owned by Michael Spencer who is the City's richest man just in case you haven't heard of him...He probably does not wear M&S ties, either: he says that his 11-year-old daughter chooses his ties for him. Michael Spencer was a billionaire until the credit squeeze hit - the fall in ICAP shares has wiped £483m off his worth. He started by working in London's futures markets and set up ICAP, the world's biggest moneybroker, in 1986, in which he now owns a £230m stake in the firm. He's also a keen poker player and of course as we've just mentioned owns City Index, the spread betting firm.
City Index forms part of the Intercapital Private Group (now Garban Intercapital), which has a significant shareholding in ICAP plc, the worlds leading derivatives broker.
Address: City Index Ltd, Park House, 16 Finsbury Circus, London EC2M 7EBInterTrader (formerly Party Markets) is a white-label of LCG and a division of PartyGaming, the global gaming company.
CMC Group, the company behind CMC Markets, started life in 1989 as a market maker in Foreign Exchange. In May 1996, CMC became one of the first companies worldwide to launch a real-time Foreign Exchange Internet trading service. Since this launch, CMC has evolved into one of the largest Internet-derived trading companies in the world, trading billions of dollars each week. CMC Markets has 20 global offices providing a localised service to clients in 70+ countries around the world. The company's ultimate controlling party is P A Cruddas by virtue of his (and his wife's) 99.9% shareholding in the company. Net profit before taxation for 2006 (before staff E.B.T and related items) was £37,600,000 (2001 - £14,654,395).
Cantor Index is part of the massive Cantor Fitzgerald futures broker with over 55 years' experience as a wholesale financial intermediary. In a bid to make their service as unique & imaginative as possible, Cantor Index have recently introduced a movie betting system where investors can spread bet on potential US box office grossings a of newly released film. Range of markets also include indices, shares, currencies, interest rates, bonds, options and commodities.
Cantor Index 1 America Square, Tower Hill, London EC3N 2LS UK csATcantorindex.co.uk +44 (0)20 7894 8800.
MFGlobalSpreads is operated by MF Global Ltd, the bermuda-based broker which split from hedge fund Man Group in 2007. MFGlobalSpreads is however authorised and regulated by the UK Financial Services Authority.
Delta Index is one of Ireland's main financial spread betting providers and also operates across Europe. It has been a good few years since Delta Index were new on the scene but they are now fairly established in Ireland having been founded in 2001.
WorldSpreads was founded in 2000 by Conor and Michael Foley and Brian O'Neil. It originally launched in Ireland but has recently split the Irish and London division into two separate companies.
Pan-Index is an Irish financial spread trading company (established 2001) based in Dublin mainly targeted to the Asian market.
ODL Securities with its flagship product ODL Markets is one of the latest entrants to join the spread betting marketplace.
Finotec Group, an online foreign exchange company is the latest entrant in the market with its launch of the FinoSpread trading platform.
Tradefair is a company owned by the betting exchange Betfair and runs its platform under licence from London Capital Group which also owns Prospreads and Capital Spreads.
Founded in 2004 Spread Co is a privately owned, UK FSA Regulated, specialised spread trading, CFD and forex software provider and market maker.
Etrade launched their spread betting offering in 2005 after identifying that there was a demand from their clients for a product where clients could research and place trades themselves. However, in January 2010 the USA holding company of E*TRADE UK decided to withdraw from the provision of local market trading services (including spread betting) in the UK and subsequently TD Waterhouse acquired the UK customer base of E*Trade Securities Limited (UK). Etrade Spreadbetting is not currently accepting any new members.
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