Although spread betting has been part of the
financial industry for over 30 years there are still many who have
little or no understanding of the product or who are dismissive of
it as something that is used by gamblers rather than investors.
The truth is that the reason that spread betting has grown so
rapidly in popularity is because of the ease that clients can gain
flexible access to the markets whilst enjoying, under current
legislation, tax free profits. By structuring the client trade as a
bet, the spread betting firms are able to offer products very
similar to the FX, futures and CFD providers with the added benefit
of a tax free status. On the face of things it would
appear strange as to why a trader would be choosing to use any
other broker to trade with but there remains a number of people who
are uncomfortable with the idea that they are betting rather than
trading. The fact is that the spread firms would happily describe
their products as spread trading rather than spread betting if it
was going to encourage more traders to use their services but this
would mean that their clients would be subject to taxation in the
same way as a CFD, FX or Futures trader would be. Trade the
markets with a CFD, futures or FX broker and pay 18% CGT or spread
bet on the same markets and pay no tax on your profits? You
decide!
The spread betting firms have been embroiled in an
almighty price war that has resulted in the cost of dealing being
reduced to near zero levels (in fact there is a firm who advertises
zero spreads!) but with this war virtually over they have been
turning their attention to other areas of their businesses.
Technology will always be a hotbed of competition with the bigger
firms like IG Index and CMC Markets leading the way with new
innovation but another key area for these firms is client
education. Many spread companies are now offering training courses
and seminars to help new and existing clients better understand the
markets and to see how spread betting can be used to gain access to
them. The majority of these courses are run by members of
their staff although a few have chosen to use independent third
party education providers as well. These courses are free and are
incredibly useful for those starting out and who wish to learn more
about technical and fundamental analysis as well as discovering how
best to utilise the online and mobile trading systems that each
firm has to offer.
As well as these training seminars and webinars the spread firms
have also begun to offer research services with daily, weekly and
monthly reports being made available free of charge to new and
existing clients. Spread firms are not allowed to give their
clients trading advice and so these reports will be factual and
will not contain trade recommendations of any kind.
Risk management has also been another area of concern for the
spread betting firms; especially post the extreme market
fluctuations in 2008 and 2009. Most firms now offer a full suite of
risk management tools allowing clients to place opening orders,
stops losses, limit orders, Contingent and One Cancels Other (oco)
orders. Trailing stops are new to the spread betting market but are
growing in popularity and whilst these orders types are only
available with a couple of providers at the moment we expect to see
most firms offering these in the near future.
Most spread betting firms offer access to free charting software
with some going further to offer charting packages that recognise
when certain technical patterns are being formed and alerting the
trader that a market could be ready for a trade. These are all very
useful tools for the novice and experienced trader alike and should
be taken advantage of where possible.