subject: History of Spread Betting [print this page] History of Spread Betting History of Spread Betting
History of Spread Betting
Spread betting is becoming extremely popular in the UK and is now at the height of its industry in terms of turnover, accounts and growth.
Spread betting originally started in the UK when a city trader named Stuart Wheeler set up the IG Index in 1974. Originally this stood for the Investors Gold Index, however this was shortly updated to International Gold due to altercations from the government at that time. Wheeler would invite a close number of friends at New Court, the office of N.M Rothschild to set the price of gold bullions for that week. Once this committee had agreed and "fixed" the gold prices they would then let the market and general public know.
Wheeler invented spread betting by taking allowing his friends to wager on the fixed price of gold for the next week. He would provide them with an "offer" (buy) price, and if they thought that the gold price would be higher than this in the next announcement they could buy and make a profit. Likewise, if the price fell below this then they would lose money on the difference.
This activity of spread betting caught on quickly as speculators were very interested in guessing the moving prices of gold. Soon after the IG Index as founded, the City Index also opened up providing competing services.
In the 1980s, spread betting grew slowly. At this time the only markets that you could speculate on included currencies, commodities, a few stock indices and options. The lack of interesting in spread betting in comparison to conventional forms of investment mean that it precluded the majority of the market.
It wasn't until the 1990s, particularly the late 1990s and the technology boom of 2000 that spread betting really took off. Growth rates were massive as firms such as Spreadex, FinSpreads, CMC Markets and ETX Capital entered the market between 1999 and 2004. A lot of the growth for this industry came down to changes in technology and more media attention and exposure given to the markets such as Bloomberg, Yahoo Finance and Reuters. Capital Spreads and TradeFair also entered the market from 2003 to 2008, and nowadays there are now more than 20 spread betting companies operating from the UK alone.
The main reasons for growth in spread betting are that it is tax-free, exempt from stamp duty, and because investors can trade on leverage it is much more profitable than conventional trading means. Many successful city traders today are switching to spread betting because of the extra profits that they can earn speculating on currency exchange rates using technical analysis and data. Mobile spread betting, through smart phones, has also led to more trade and turnover since traders can now make transactions on the go and keep up to date with market information 24/7.
