Simon English: Why is the dark art of spread betting thriving?
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Outlook The spread betting sector has still yet to firmly shake off the idea that somehow it is up to no good. In some minds, just the words "betting" and "tax free" conjure up dark images. Playboys on speed boats, perhaps, slicing through Geneva waters while Granny Smith loses her savings on punts she does not understand.
An alternative view: this industry is the City of London at its innovative best. If in the past it has attracted the wrong sort of clients, these days it's firmly a deal between consenting adults who understand the risks they are taking and can mostly afford to lose what they bet.
The recent disaster at WorldSpreads – it went under, is under investigation, and client funds are seriously under water – has hardly helped perceptions, but such disasters are not limited to spread betting.
IG's year-end sales figures yesterday show a business in rude health despite (because of?) the chaos in financial markets.
Moreover, there's a chance they have hit upon a highly unusual business model.
The statement says that profit margins remain at 50 per cent (in English: it makes 50p from every £1 of revenue). In most industries that margin would be eroded by competitive price pressures. In this one, says chief executive Tim Howkins, every time they cut supposed profit margins by narrowing spreads, the level of activity simply goes up and margins say the same.
This can't last, you'd be tempted to say. But it has for many years at IG. What other industry can claim such a success? Mr Howkins can't think of one, neither can I. Suggestions welcome.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments