Spread betting involves placing a speculative bet on the price movement of a security based on the bid and offer prices (spread) offered by the spread betting broker--without taking any position in that security. For example, a broker-offered bid and ask for a security are $100 and $105, and an investor believes that the price will fall. He bets $5 per point. If his prediction comes true and the price goes down to $90, he profits by $50 [($100-$90)*$5]. But if his prediction is incorrect and price rises to $115, he will lose $75. (Related: Investopedia explains Spread Betting)
This article provides an indicative list of top spread betting brokers, who offer spread betting across multiple asset classes of indices, shares, forex, commodities, and even bitcoin.
Traders should note that spread betting is illegal in several countries including the US, Japan, and Australia for a number of reasons, including its classification as online gambling, significant leverage exposure, the availability of derivatives exchanges, and no tax rules on spread betting profits. It remains legal and regulated in the UK and a few European countries. The UK even offers a tax break on spread betting profit and the spread betting market remains concentrated in the UK.
- IG: One of the largest spread brokerage firms based in the UK for the last 40 years and regulated by the Financial Conduct Authority (FCA), IG claims to be the market leader with 126,000 global active traders and 41% of the UK market share. It offers trading across 10,000 global markets. Backed by a high-end technology platform with claims of 0.1 second trade execution, IG offers free real-time news, advanced charts, free mobile apps for trading, and even integration of user's own front-end technology with IG APIs and terminals. Minimum stake is 50p per point with the daily spread and margin varying with different contracts.
- Finspreads: Owned by City Index Ltd., which has been around for 29 years, Finspreads was a pioneer in offering a browser-based trading platform in 1999. Complying with the planned changes by the European Union and the G20, Finspreads offers centrally-cleared trades through LCH.Clearnet, a European based independent clearing house that serves major international exchanges, for client money protection. Spread betting starts with 10p per point, with tight spreads (from 0.4 points) and low margins (from 1%) varying per the underlying assets available across 12,000 global markets. Along with different account types to suit client needs, Finspreads also offers mobile trading apps, charting tools, watch lists, streaming news, and market profile views.
- Capital Spreads: Owned by London Capital Group Ltd. (LCG) and regulated by the FCA, Capital Spreads is a popular spread betting brokerage firm. It offers minimum spread starting at 0.1% (for UK 100 shares), low deposit of £30, trading available with £1 per point on over 2,500 different products, including global shares, commodities, currencies, indices, bonds and interest rates. Its spread betting offerings are backed by robust technology that facilitates advanced charting with live tick-by-tick data, educational webinars, trading tools, trailing stops for risk management, free demo account, mobile trading apps, and different account types to suit individual needs.
- Spread Co: Regulated by the FCA, Spread Co. Limited boasts offering a dedicated relationship manager to all clients. One can start with a minimum deposit of £25 only and trade £1 per point on the UK100 with tight spread starting at just 0.8 points. Asset classes available for spread betting include indices, equities, currencies, and commodities across more than 1,000 global markets. Trading platforms include a web browser-based interface, mobile app, and iPad app.
- DF Markets: Delta Financial Markets Ltd. (DF Markets) is another popular spread betting broker in the UK regulated by the FCA. It offers an easy-to-use trading platform with web, mobile, desktop versions. Available spreads start from only 0.6 points (on USDEUR) and a minimum trade of £1 per point. Tradable assets include commodities, currencies, equities, and indices on hundreds of markets across the globe. A dedicated customer account manager, free demo account, and free educational tools are added benefits.
The Bottom Line:
According to a research by the Cass Business School in London, only 20% of spread betters make a profit. Many brokers in foreign countries allow international clients to sign-up, but regulatory and legal requirements, applicability of rules to international account holders, and foreign exchange risk should be considered. Spread betting brokerage firms should be selected after careful consideration of factors such as if local laws allow spread betting (locally or abroad) and the regulatory status of spread betting brokers.
Disclaimer: At the time of writing this article, the author did not have any account with any of the mentioned spread betting brokerage firms.