It all started when Stuart Wheeler, an entrepreneur and keen gambler founded IG Index in 1974 from his home in Clapham with a 5,000 pounds loan, to enable UK residents to speculate on the price of gold at a time when exchange controls prevented them from buying it, except at a premium. Business wasn’t good then and in fact he later admitted that ‘things were going very badly’. A friend advised him to ‘chuck in IG and get a normal job’ but he ignored this advice and turned IG into one of the fastest growing companies with a current market capitalization of over £1 billion. He branched out into taking bets on the FTSE and the Dow Jones, and virtually created a new industry of spread betting. In fact, the history of spread betting is really the history of Stuart Wheeler as he practically invented spread betting.
For a few years IG had the spread betting market to itself, but it was eventually joined by City Index and Sporting Index. In subsequent years Spreadex and Cantor Index have joined the fray. Spreadex offered telephone trading but their spreads were about the same as the original 3. They all had quite large spreads on the instruments they offered but with the introduction of CMC Markets (Deal4Free) which entered the industry providing online trading with real-time charts, the claim of much narrower spreads and lower margin requirements was the start of a changing tide.
At first CMC did not have a great impact on the business of the other original providers. Although CMC attracted many new clients the overall service was seen as a lower standard. While spreads were lower, often dealing size was restricted by re-quotes. It has been suggested this was a measure adopted by the company to put off scalpers and try to attract traders who wanted to trade for longer periods. CMC also had some wild swings on the prices and this impacted on stops which some found hard to accept. Nevertheless with the lower funding requirements and tight spreads CMC customers’ base grew.
Next, came Finspreads who although not offering the spreads as tight as CMC were still lower than the original 3. At first the site had some problems and moans of not getting a fill at the price displayed. However they have prospered and added pressure on the others to offer the same sort of service. Margins and spreads started to reduce.
Next, ETX Capital came onto the scene. ETX Capital fell into the category of Finspreads but both were unable to match CMC spreads. The launch of Capital Spreads in 2003 started to put pressure on CMC as to the claim of the tightest spreads which saw CMC reduce the FTSE spread from 4 to 3 and then 2 points. The others followed suit and subsequently the FTSE rolling day instrument started being offered by the vast majority of companies with a good value spread of 2 points (for spreadbetting). Even IG Index and CityIndex started offering it with a 2 point spread.
In 2005, the industry saw the emergence of WorldSpreads, which pioneered offering 1-point spreads on the FTSE index. This move was quickly adopted by Capital Spreads, and it set a new standard, making 1-point spreads the industry norm for major indices.
During this period, the industry also experienced notable expansion with the entry of several new players. Over the subsequent two years, providers like GFT UK, MF Global Spreads, Delta Index, ODL Markets, and FinoSpread entered the market, enriching the competitive landscape and broadening the range of services available to traders.
However, the competitive environment led to some consolidation. For instance, Finspreads, a popular provider, was acquired by City Index in the fourth quarter of 2006. Following the acquisition, the two companies began integrating and streamlining their back-office and middle-office operations, reflecting a broader trend of mergers and acquisitions within the industry. These changes often aimed at improving efficiency and service delivery in response to increasing competition and evolving regulatory requirements.
During the mid-to-late 2000s spread betting continued to gain traction as a retail financial product. For instance, Trade Fair from Betfair, Paddy Power and Saxo Bank subsequently launched a white-label service from London Capital Group while PartyGaming partnered with City Index to produce PartyMarkets. At the time traditional private-client brokers also started to realize that there is a demand for spread betting from their clients and joined the fray – for instance Barclays Spreadbetting, Hargreaves Lansdown Spread Betting and TD Waterhouse were all white-labelled versions of City Index.
- TradeFair (Betfair)
Launched in 2006 as a white-label service powered by London Capital Group. It was part of Betfair’s efforts to diversify into financial betting and leverage its existing betting exchange customer base. - Paddy Power
Also partnered with London Capital Group to offer a white-label spread betting service around the same period, likely between 2006 and 2007. - Saxo Bank
Collaborated with London Capital Group during the late 2000s to launch its financial spread betting platform, targeting retail clients who sought access to Saxo’s expertise in derivatives and forex trading. - PartyMarkets (PartyGaming)
PartyGaming partnered with City Index to create PartyMarkets in 2007, aiming to attract PartyGaming’s large online poker and casino customer base into the world of financial spread betting.
These partnerships and white-label launches reflect the industry’s drive to capitalize on established customer bases of well-known brands. This was a pivotal moment for spread betting as it moved from being a niche product to becoming more mainstream, with consumer-facing brands helping to introduce it to a wider audience. This phase of consolidation and competition highlights the dynamic nature of the spread betting industry, as providers adapted to changing market demands while seeking to gain or maintain a competitive edge.
Several prominent names that once shaped the spread betting industry are no longer in operation, often due to challenges such as market dynamics, regulatory changes, or financial mismanagement. Here’s an overview of some notable exits:
- Cantor Index
Cantor Index, a well-known provider of financial spread betting, eventually ceased operations due to increased competition and a shift in focus by its parent company, Cantor Fitzgerald, toward institutional trading and other financial services. - Capital Spreads
Capital Spreads, part of the London Capital Group (LCG), struggled with rising competition and regulatory pressures. LCG underwent significant restructuring, rebranding as LCG to consolidate its offerings. However, it failed to regain its market position and was eventually acquired in 2022 by a private investor group. - MF Global Spreads
MF Global’s demise was part of the broader collapse of its parent company, MF Global Holdings Ltd., in 2011. The collapse was triggered by excessive exposure to European sovereign debt and allegations of mismanagement, leading to one of the largest bankruptcies in U.S. financial history. - TradeFair
TradeFair, Betfair’s spread betting venture powered by London Capital Group, exited the market as Betfair restructured its operations. The company chose to focus on its core betting exchange business and divested from financial spread betting, which didn’t align with its strategic priorities. - Paddy Power
Paddy Power, which had ventured into spread betting via a white-label service with London Capital Group, also exited the market. Its departure reflected a strategic decision to concentrate on its core sports betting and gaming business rather than financial trading services. - PartyMarkets
PartyGaming’s spread betting service, PartyMarkets, operated in partnership with City Index. The service was discontinued as PartyGaming merged with bwin to form bwin.party in 2011. The new entity prioritized its core online gaming and poker businesses over spread betting, which was less profitable.
To conclude the spreads through spreadbetting have vastly improved over the last 18 years narrowing the gap on the service provided by share brokers, CFDs, Futures and Options. To get this into perspective just imagine that 20 years ago, a spreadbet on the FTSE 100 index would have cost you around 10 points, which would equate to £50 for someone using a sizeable stake. Now it would generally be possible to open the same position for just 1 point or less. Today, we can say that transaction speeds and costs, as well as the bid-offer spreads have all been slashed as providers become more efficient and competitive online and online trading has helped private traders gain easier access and control.
‘One of the biggest changes I’ve seen is the increase in the number of trades being placed online as opposed to over the phone, with most companies seeing at least 90 per cent of their business come in this way,’ ‘This has been accompanied by a dramatic expansion in the range of markets that people can trade.’
Stricter Regulations and Enhanced Oversight (2016 Onward)
From 2016, the spread betting and CFD industry faced mounting regulatory scrutiny, particularly in Europe. The European Securities and Markets Authority (ESMA) implemented significant measures in 2018, including restrictions on leverage, negative balance protection, and standardized risk warnings. These regulations aimed to protect retail investors but also made it harder for brokers to attract new clients due to reduced profitability and stricter marketing rules. The FCA in the UK followed suit, imposing similar restrictions and introducing a ban on the marketing and distribution of binary options in 2019.
Market Consolidation and Exit of Smaller Players
The tightened regulatory environment, combined with rising operational costs, led to industry consolidation. Larger, well-capitalized providers such as IG Group, CMC Markets, and Plus500 thrived, while smaller or less competitive firms exited the market. Some providers pivoted to focus on professional clients or moved operations outside Europe to less regulated jurisdictions. The industry saw several high-profile exits and acquisitions, including the collapse of firms unable to adapt to new requirements.
Rise of Retail Trading and Technological Advancements
The industry benefited from the surge in retail trading interest, particularly during the COVID-19 pandemic (2020–2021). Lockdowns, increased market volatility, and accessible trading platforms led to a boom in retail participation. Providers invested heavily in mobile platforms, user-friendly interfaces, and educational content to cater to this growing audience. The gamification of trading and innovative features like fractional trading attracted a younger demographic, though this also drew criticism for promoting excessive risk-taking.
Cryptocurrency and Emerging Markets
The rise of cryptocurrencies since 2017 significantly impacted the industry. Many spread betting and CFD providers began offering crypto-based products to meet growing demand. However, regulatory restrictions in countries like the UK, where the FCA banned the sale of crypto derivatives to retail clients in 2021, tempered this trend. Additionally, brokers increasingly sought growth in emerging markets such as Asia and Latin America, where regulatory environments were less stringent, and retail interest in speculative trading was high.
Shift Toward Professional Traders and Global Diversification
With the retail market becoming harder to serve under regulatory constraints, many brokers turned their focus to professional clients. Firms adapted their offerings, including bespoke leverage, tailored educational resources, and advanced trading tools. At the same time, global diversification became a strategic focus, with companies setting up operations in less regulated markets, such as the Middle East and Africa, to mitigate challenges in Europe.
Summary
Since 2016, the spread betting and CFD industry has undergone profound transformation, shaped by stricter regulations, technological innovation, and shifting client demographics. While these changes introduced challenges, they also created opportunities for well-positioned firms to consolidate their market presence and expand globally. As the industry evolves, balancing regulatory compliance with innovation and customer satisfaction remains a critical challenge.
