History of Financial Spread Betting
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Whilst sports betting can be traced back to Ancient Greece the notion of spread betting is relatively new. Financial spread betting, is 'spread betting on financial instruments', and that has a far more recent history.
The rise of spread betting in the UK can be dated back to the '70s when in '74 IG Index was founded. At the time IG Index was the only spread betting company in the UK. This initial growth was helped partly by the liberal UK Government tax policies and partly due to the latent speculative nature of the markets.
However, in the '70s, the principles enjoyed little growth due to the perceived complexity and lack of market information.
The internet assisted the more recent growth by providing a place for simplified spread betting platforms, a wealth of free charts and free trading information. Over the course of time The City, the heart of London's Financial Market, also evolved its trading processes and the general level of complexity of trades increased.
Before this however, the majority of financial markets were phone based / operated via private communication channels. Almost like a private internet / intranet. This limited the market data available and therefore the ability for people judge the movements of shares and (stock market) indices.
Some argue that it was the global 'Gold Price Boom' of the early '80s that put spread betting on the map. Following the Iran Iraq war, the bullion market exploded with prices reaching an all time high of $850 an ounce.
This volatility offered speculators the prospect of making profits (and losses) by placing bets on the movement of the price of Gold. Also see spread betting on gold. From this people began to understand the logic behind spread betting, namely speculating on the rise and fall of a market and betting on the extent of deviation itself. The deregulation of the London Stock Exchange (LSE) in '86 helped increase the volume of data to the public.
This created a surge of brokers and traders.
The real growth in spread betting took place from the mid to late '90s and the advent of a (wide spread) internet. The Internet, and IT industry as a whole, increased the information flow and new trading tools to enabled analysts and speculators alike to trade the markets.
With people understanding how to spread bet on shares and indices, and the freely available data, financial spread betting took hold.
Naturally the number of companies in the betting industry has also increased significantly. That in turn increased the competition levels which in turn helped create better value for spread bettors. It also increased the variety of markets. Today investors can spreadbet on grey markets, forex (foreign exchange currency trading), individual equities, interest rates, government bonds, stock exchanges (better known as 'indices') eg betting on whether the FTSE 100 will go up or down, as well as commodities such as gold and oil, etc.
Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.
'History of Financial Spread Betting' by KK, updated 28-Jan-09
For related pages also see:
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History of Financial Spread Betting, updated 28-Jan-09
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Spread Trading Tips - A Technical and Analytical Game, updated 28-Jan-09
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