By Simon Collins, Director, Cashcade Ltd.
Once the preserve of stockbrokers and market makers spread betting is becoming more popular than ever among smaller investors, with as many as 1 million people in the UK now taking part.
The credit crunch has sparked a surge in spread betting in Britain, as people speculate tax-free on the financial markets rather than sink their capital into turbulent stocks.
With no taxes to pay and no commission charges (the cost is the spread between buying and selling prices when you fix your bet), spread betting has increased in popularity as nervous investors worry about expanding their portfolios of company shares.
Rather than regular betting on a precise outcome, spread betting allows punters to gamble on a range of outcomes, with the accuracy of the wager determining how much is won or lost.
Spread betting is gambling, not investing. You are taking a punt on the future movement (either up or down) of a share price, index or a commodity.
GBGC, a gaming research business, suggests that this is not the case, saying they have long forecast there will be no such explosion in this category. But we disagree.
Several high profile brands have launched services in this category. For example, Trade Fair from Betfair and Paddy Power which has launched a service from London Capital Group. With major consumer and B2C brands putting their existing customer bases in front of these services, will these specialist products become even more mainstream?
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