Spread trading was originally invented in the 1970’s in the United Kingdom as a response to restrictions that came in force at the time on the dealing of certain financial instruments like gold. By trading a derivative of the underlying financial instrument, spread traders were able to mimic the profit and loss that they would have incurred if they had been able to trade the underlying asset itself.
Following a 40 year timeline that’s still going today, spread betting history is rich and intriguing, yet it follows many of the trends that other forms of gambling in its evolvement. Its peaks and troughs closely mirror the movements of the markets and periods of market turbulence and booms/busts on which volatility it relies on, and all of this inside just one half-century.
Its origins stems even before that – in the 1930s a mathematics teacher-come-bookmaker named Charles K McNeil invented the pastime in the United States of America. Many years passed until the UK cottoned onto the trend in the 1970s when it was brought to market by one of London’s best known figures Stuart Wheeler. Wheeler and his friends would discuss gold bullion on such a regular basis that they would make bets with each other on where the price will be the following week. Stuart Wheeler then began to print off bid-offer spreads for his colleagues to bet on, and thus spread betting in the UK was born.
At the time in 1970, gold was very much the market to bet on. This continued well into the 1980s, joined only by a select few other markets that were ideal for this sort of trading. It wasn’t until the technology boom in the 1990s, however, that spread betting history came into its own. The development of the Internet and the World Wide Web meant investors could bet online, and on a growing number of different markets such as shares. By the mid-90s, most spread betting companies were conducting their business online, where investors could access everything at the click of a button.
From 2008 to 2013, spread betting history began to plateau as growth slowed down. It’s still a very popular phenomenon in the UK, but the market has matured. Today the market involves about 150,000 people taking part on a regular basis in Ireland and the United Kingdom alone, betting on whether they think certain markets will rally or fall over the following hours, days, weeks or months for that matter. Whether we will experience another boom as we did from the 1970s to the 1990s or a bust as in the dot com we cannot be sure, but this is what makes trading exciting 🙂
Why Spread Trading?
Spread trading a number of advantages over conventional trading -:
Gearing: Spreads are a geared or leveraged trading product allowing clients to match the market exposure of a traditional underlying share purchase with a small percentage of the capital. The leverage maximises any potential profit but can also expose you to sizable losses.
Low Costs: Spreads are a low cost, highly efficient alternative to traditional stock trading. Many of the taxes traditionally associated with conventional trading, as well as additional costs such as stamp duty are not applicable to spread trading. Spreads are free from capital gains tax under current UK tax rules.
Short Selling: Spread trading provides investors the ability to go both short (sell) or long (buy) on numerous of financial instruments, thereby allowing investors to profit from rising or falling markets.
Online Trading Platforms: Providers today offer fully automated, real time trading platforms on which can both view the underlying market prices and trade.
Transparent Pricing: There are no added costs or charges on top of the price that you see on the trading application. Spread trades give international investors access to overseas assets when otherwise restricted.
Please be aware that financial spread trading carries a high level of risk to your capital. Only speculate with money you can afford to lose as you can lose more than your original deposit. Spread trading can be very volatile and prices may move rapidly against you. Resulting losses may require further payments to be made. Spread trading may not be suitable for all customers, so ensure you fully understand the risks involved and seek independent advice if necessary.