A Brief History Spread Betting


History often comes down to interpretation and spread betting is no different.

Here we have two versions on the history of spread betting.

A History Spread Betting – Version 1

Below, an article by City Index

Financial spread betting was born in London in 1974, the brainchild of an unemployed stockbroker named Stuart Wheeler. His idea was to give people the opportunity to trade on the movements of gold prices without having to pay the exorbitant cost required to actually own the physical commodity.

Wheeler introduced the concept of spread betting to some of his friends, deciding a sell price and a buy price and then allowing them to spread bet on whether the index would rise or fall over the following week.

Although losses incurred could be greater than a trader’s initial outlay, it was immediately evident that one of the advantages of spread betting was the fact that it would allow traders to profit from a falling market as well as a rising one.

Word of financial spread betting soon spread across London, and in 1975 Wheeler turned his idea into a company, IG Index.

By creating a more accessible, not to mention tax-free*, alternative to standard investing, Wheeler had opened the door for a new generation to join the financial markets. At first, spread trading focussed solely on gold and then later on currencies, commodities and indices as the market expanded.

Boosted by the economic boom, other spread betting firms started to appear in the 1980s, with City Index arriving next. In the years that followed, spread betting would reach across every conceivable financial market, from equities to futures.

Until the 1990s, however, the lack of sophisticated technology available worked against spread bettors and spread betting companies alike. Traders were unable to access up-to-the-minute market news and spread betting providers were unable to offer real-time spreads for their range of markets.

Consequently, when the mid-1990s signified the start of the technology boom, financial spread betting took a huge step forward. Stock market activity became headline news, dotcom stocks went through the roof and spread bet providers launched faster online trading platforms with new tools such as automatic stop loss orders.

Most recently, in 2009, City Index launched City Trading(TM), its first spread betting and CFD trading iPhone(TM) app, meaning that spread bettors today can finally trade whatever, wherever and whenever they want.

Financial spread betting has come a long way since 1974.


A History Spread Betting – Version 2

Whilst sports betting can be traced back to Ancient Greece the notion of spread betting is relatively new.

The rise of financial 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 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. 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.