Spread betting enables investors and traders to speculate on the direction of an asset’s price without owning the underlying security. The profit or loss is determined by the degree to which a spread bettor predicts an outcome, as opposed to a fixed-odds bet where there is a win/loss outcome and a predetermined payout or loss.
Spread Betting in the United Kingdom
Spread betting is concentrated in the United Kingdom and is regulated by the Financial Conduct Authority (FCA), an independent regulatory body. As of July 2016, United Kingdom citizens are offered spread betting tax concessions. Spread betting is prohibited in the United States, Japan and Australia due to its high level of risk. Investors and traders who are looking for a large spread-betting company may want to explore the following three options.
IG Group Holdings PLC
IG Group Holdings PLC (OTC: IGGHY) is a U.K.-based global online trading company founded in 1974, providing retail and institutional customers access to stocks, commodities, indexes and foreign exchange (forex). As of July 2016, it has a market capitalization of £2.98 billion, or $3.96 billion. The company is a leading provider of spread betting in the United Kingdom, commanding 41% of the market share and offering access to over 10,000 markets. Customers are provided with cutting-edge trading technologies that can be used on multiple devices.
As of July 2016, minimum spreads for popular products are 0.8 of a point for the euro/U.S. dollar (EUR/USD), 1 point for the FTSE 100, 0.5 point for spot gold and 0.1% per spread side for U.K. and U.S. stocks. The minimum stake size is £0.50 per point. The company won the What Investment Readers' Awards for best spread-betting provider in 2014 and 2015.
CMC Markets PLC
CMC Markets PLC (LON: CMCX) provides financial services and is a leading online trading company, acting as principal and market maker to its clients for stocks, indexes, forex and contracts for differences (CFDs). The company has a market capitalization of £820.58 million, or $1.09 billion as of July 2016. CMC Markets was founded by Peter Cruddas in 1989. The company provides spread-betting access to over 9,500 markets through its proprietary trading platform.
Minimum spreads for popular products are 0.7 of a point for the EUR/USD and USD/JPY, and 1 point for the UK 100 and Germany 30. The minimum stake size is £1 per point as of July 2016. The company offers a demo account for both potential and existing customers as well as extensive trading educational material. CMC Markets facilitates risk management by providing customers with trailing and guaranteed stop-loss orders. Cash rebates are offered to customers who spread bet high volumes.
City Index Group
City Index Group, founded in 1983, is a subsidiary of GAIN Capital Holdings Inc. (NYSE: GCAP). As of July 2016, the parent company has a market capitalization of $331.4 million. City Index provides access to online spread betting, forex and CFDs. The company offers exposure to approximately 12,000 global markets, the most of the three spread-betting companies listed.
City Index is competitive in terms of pricing, offering a minimum spread of 1 point for both the UK 100 and Germany 30; however, the minimum spread for the EUR/USD is 1 point, the highest of the three companies. City Index requires a minimum stake size of £0.25 per point. The company provides educational videos for traders at all levels; the learning process is enhanced with free training seminars and webinars. Spread betting can be executed on the company’s desktop or web-based trading platforms. City Index also has spread betting applications for iPhone, Android and Windows devices.
