As I mentioned in my introduction, the spread betting industry is now beginning to mature and develop, having originally been founded on the success of IG Index, which was the first spread betting company to offer a bet on the price of spot gold, back in 1974. Since then, many companies have come and gone, some simply seizing the opportunity to make some quick profits from an immature market ( and disappearing just a quickly) whilst others have expanded and grown, either organically or by acquisition. As a result the spread betting market has now matured, with five major companies dominating the market in terms of sheer financial muscle on the balance sheet, with a raft of smaller companies offering niche markets for their clients. Before opening your spread betting account it is vital that you have some background knowledge of the company who is holding your trading capital, and against who you will be betting, so below I have provided some basic details for you which I hope are helpful and if you would like a more complete analysis then I do have another site on spread betting companies, which gives a complete overview along with my personal recommendations.
City Index is another spread betting company with a long track record and pedigree, having opened their doors for trading in 1983, and grown both organically and by acquisition over the last 25 years. In 2001, the company acquired Finspreads followed by IFX Markets in 2005 and finally FX Solutions, the last of which strengthened the company’s forex products in particular. The company is now owned by ICAP plc, which is owned and run by CEO Michael Spencer, who also founded City Index. The company provides bets on all the usual markets as well as bonds, sectors and interest rates.
CMC markets is another with a long history in the spread betting industry, having begun life in 1989 as the Currency Management Corporation. CMC is still owned by it’s original founder, Peter Cruddas, although Goldman Sachs subsequently purchased a 10% interest in the company in 2007. CMC is quoted as being a market maker, which can be viewed negatively and there do seem to be an increasing number of complaints in the spread betting forums. However, with over 1,000 employees around the world they certainly have the financial clout to survive.
Capital spreads was originally established in 1996 and is now owned by the London Capital Group, which is listed on the AIM ( Alternative Investment Market) and you can find the latest share price here. In 2008 LCG also acquired Prospreads.com and the two companies now provide a twin approach for the company, with the former aimed at the retail trader, and the latter for the professional spread bettor. Capital Spreads is an unusual spread betting company in that all bets are automatically protected with a stop loss, and the company also allocates 20% of each trade to a separate account to allow for any slippage, so your trades are always fully protected. Many traders view this as a restrictive practice – my view is the opposite, as I believe it encourages traders to manage their risk. With Prospreads, the company offer a direct market access trading platform with a range of unique options for professional traders with trading experience.
FXCM is best known in the FX spot market where it dominates as one of the biggest players. In 2009 the company launched it’s first spread betting products, and has since strengthened its market position with the acquisition of ODL Securities in London. With revenues in excess of $600 million dollars and over 150,000 live trading accounts, this is truly one of the giants in the forex world. Their presence in the spread betting market is less impressive however, and their product range is rather more limited than the other companies mentioned above, with bonds, interest rates, options and equities all missing from their product portfolio at present. However, with the recent acquisition of ODL Securities, this will no doubt change shortly, given the company’s access to the synergies of the MT4 trading platform, coupled with the broad product range offered by ODL to its existing spread betting customers which includes a strong presence in commodities, equities and indices.
These are the five largest spread betting companies which dominate the current market, but there are many others and I have detailed these below, but again you can find more details on my other site which specifically looks at all the spread betting companies in detail, but for completeness I have listed them below and each has a link to the home page for the company :
GFT - another company that has it’s roots in the forex world. A big player in spot FX and now gaining market share in spread betting, largely due to its big portfolio of products and very tight spreads, some as low as o.3 index points. One very interesting index that they offer, which is unique is the VIX – very useful for some of our spread betting strategies as you will see shortly.
Prospreads – now owned by Capital Spreads – a great platform for professional traders which allows traders to trade at the bid and the offer inside the spread. Worth checking if you are a big size or volume trader.
Finspreads – now part of City Index and so has substantial backing as a result. Recently introduced interest rates to their portfolio along with an expansion into the growing demand for binary betting.
Intertrader - a new market player which is in fact owned by PartyGaming, a company listed on the FTSE 250 in London. The platform is licenced by London Capital Group, and offers a loyalty scheme for spread betting clients, which offers a rebate of up to 10% based on the volume of monthly trades, thereby reducing spreads. The web site is simple and uncluttered and easy to navigate.
Cantor Index – part of the Cantor Fitzgerald Group, and originally set up in 2000, the company has tried to diversify into both financial and sports markets, but having failed to gain a foothold in the sport market, has now withdrawn to concentrate on its core business in the financial world. They offer powerful trading tools as well as a Reuters news feed to their clients.
MF Global Spreads – another of the US based companies looking to expand into the UK spread betting market. Backed by Global Holdings Ltd, an NYSE quoted company, they have deep pockets and are therefore in a strong position to grow by acquisition.
Delta Index – one of several Irish companies which have sprung up in the last decade as a result of the significant growth in the Irish economy which has now slowed in the last 2 years. Delta offer one to one training on its products, and the company concentrates exclusively on the financial markets.
Worldspreads Ltd – this is another Irish company, founded in 2000, and due to a recent management buyout will shortly be changing its name to MarketSpreads. A small company in comparison to some of the giants above with around 30 employees.
Pan Index – yet another Irish company, based in Dublin and founded in the last decade. They tend to target the Far East for their clients.
ODL Securities – as indicated above the company has now been bought by FXCM
SpreadCo – a new company which has been founded by an ex employee of CMC markets. A small player at the moment.
ETrade - recently acquired by TD Waterhouse with the existing clients being managed through London Capital Group – the company is not taking new clients at the moment as far as I can tell
ETX Capital- the company has been around for almost 40 years but under a series of different names, and most recently as TradIndex, before its relaunch as ETX in 2007.
Shortsandlongs – owned by Spreadex this is the only spread betting company that I could find who offer FREE guaranteed stop loss orders to their clients – well worth a look!
Spreadex – one of the older spread betting companies which has recently launched Shortsandlongs above in 2008. The company has been around since 1999 offering a broad range of products in both sports and financial betting. An impeccable track record and portfolio to match.
PaddyPowerTrader - another of the Irish contingent but this time with a long track record going back 18 years. A publicly quoted company they are a household name in the sports betting field, and have since diversified into the financial betting market, with a strong link once again to London Capital Group
So having looked at all the spread betting companies currently offering products in the UK, let’s take a look at the different trading platforms available for you to choose from, and the advantages and disadvantages of each.