subject: Spread Betting Price War [print this page] Consumers are price sensitive and investors are no different. We often hear about supermarket price wars and now it looks like hostilities have commenced in the financial spread betting markets.
Jacob Wood has been running CleanFinancial.com, the financial spread betting comparison site, for nearly 3 years and in that time he has also seen the spreads becoming tighter and tighter.
According to Wood, The spreads for the crude oil and gold markets stabilised about a year ago at around 5 points. However the more popular markets such as the Daily FTSE 100 and Daily DAX 30 have narrowed to just 1 point.
Whats interesting is that the minimum stakes have also come down and stabilised at around 1 per point.
It was not long ago that only the more aggressive companies like FinancialSpreads.com offered a FTSE 100 Daily market with a 1 point spread. Now the typical in-hours spreads with the biggest spread betting companies also 1 point.
Why all the fuss? Well according to Financial Spreads, If you know spread betting, you'll know that tighter spreads mean better value. A tighter spread means that the market does not have to move as far before you can make a profit, so we think this is better value. However, what is interesting is the secondary affect as price becomes less of a distinguishing factor.
The retail investor has benefitted as the operators have become more competitive. If you look around, IG Index offers more than 8,000 markets. FinancialSpreads.com have even opened their trading desk so that you can trade the FTSE 100, Oil, Gold and Euro/Dollar 24 hours a day, Sunday to Monday.
The closing bell may, or may not, be important to Gordon Gekko in the forthcoming sequel to Wall Street but it seems that the spread betting firms are more than willing to let investors trade whenever they want.
As with all price wars there are limits and there are winners and losers. At the moment it is not clear who the losers will be but the investors are certainly benefiting
Having said that, whilst this does not appear to be an all out price war, it will still be putting pressure on margins. With a number of new entrants to the market it may not be too long before we see some consolidation amongst the spread betting companies.
