Spread betting brokers involves making a speculative bet on the price movement of a security based on the bid and offer prices (spread) provided by the spread betting brokers—not taking any position in that security. For instance, a broker-offered bid and ask for a security are $100 and $105, and an investor thinks that the price will decrease. He places bets of $5 per point. If his guess comes true and the price falls to $90, he profits by $50 [($100-$90)*$5]. But if his guess is wrong and price increases to $115, he loses $75.
We provide an indicative list of top spread betting brokers
Traders need to keep in mind that spread betting brokers is illegal in some countries such as the US, Japan, and Australia for some reasons, including its classification as online gambling, remarkable leverage exposure, the available derivatives exchanges, no tax rules on spread betting profits. It stays legal and run in the UK and in some European countries. The UK even provides a tax break on spread betting profit and the spread betting market remains focused in the UK.
Spread betting brokers – IG:
One of the biggest spread betting brokers firms based in the UK for the last 40 years and operated by the Financial Conduct Authority (FCA), IG claims to be the market leader with 126,000 global existing traders and accounts for 41% of the UK market share. It provides trading across 10,000 global markets. Backed by a high-end technology platform with claim of 0.1 second trade execution, IG has free real-time news, advanced charts, free mobile apps for trade, and even integrating of user’s own front-end technology with IG APIs and terminals. The smallest stake is 50p per point with the daily spread and margin varying with various contracts.
Spread betting brokers – Finspreads:
Regulated by City Index Ltd., which has existed for 29 years, Finspreads was a pioneer in supplying a browser-based trading platform in 1999. Abiding by the estimated changes by the European Union and the G20, Finspreads provides centrally-cleared trades via LCH.Clearnet, a European based independent clearing house that serves major international exchanges, for customer money protection. Spread betting begins with 10p per point, with tight spreads (from 0.4 points) and small margins (from 1%) changing per the underlying assets available across 12,000 global markets. Along with different account types to meet customer needs, Finspreads also offers mobile trading app, charting tool, watch list, streaming news, and market profile views.
Spread betting brokers – Capital Spreads:
Run by London Capital Group Ltd. (LCG) and regulated by the FCA, Capital Spreads is a common spread betting brokerage firm. It offers smallest spread at 0.1% (for UK 100 shares), low deposit of £30, trading available with £1 per point on over 2,500 products, including global shares, commodities, currencies, indices, bond and interest rate. Its spread betting brokers offers are backed by robust technology that facilitates advanced charting with live tick-by-tick data, education webinars, trading tools, trailing stops for risk management, free demo account, mobile trading apps, and numerous account types to suit individual needs.
Spread betting brokers – Spread Co:
Operated by the FCA, Spread Co. Limited boasts providing a dedicated relationship manager to all customers. One can begin with a smallest deposit of £25 only and trade £1 each point on the UK100 with tight spread beginning at just 0.8 points. Asset classes available for spread betting brokers are indices, equities, currencies, and commodities across more than 1,000 global markets. Trading platforms contains a web browser-based interface, mobile app, and iPad app.
Spread betting brokers – DF Markets:
Delta Financial Markets Ltd. (DF Markets) is another common type among spread betting brokers in the UK regulated by the FCA. It offers an easy-to-use trading platform with web, mobile phones, desktop version. Available spreads begin from only 0.6 points (on USDEUR) and the smallest trade of £1 per point. Tradable assets are commodities, currencies, equities, and indices on hundreds of markets across the world. A dedicated customer account manager, free demo account, and free educational tools are extra benefits.
Spread betting brokers – The Bottom Line
According to a research carried out by the Cass Business School in London, only 20% of spread betters make profit. A lot of brokers in foreign countries permit international customers to sign-up, but regulatory and legal requirements, applicability of rules to international account holders, and foreign exchange risk need to be taken into account. Spread betting brokerage firms should be chosen after careful consideration of elements such as if local laws permit spread betting (locally or abroad) and the regulatory status of spread betting brokers.