Spreads contract in a crowded market

For a business based on the logic of numbers, the spread-betting industry is surprisingly averse to the figure five. When that many companies are up and running, mergers start to happen. The latest took place on Wednesday when the sports section of City Index was subsumed by Sporting Index, already the biggest of the bunch, for an undisclosed sum. In May, William Hill Index was sold to IG, who had taken over the Ladbrokes spread-betting arm four years ago this month, for £1.1m. Punters tapping in to page 609 on C4's Teletext yesterday were informed that the new brand – Sporting City Index – "is designed to deliver a much improved sports spread-betting service".

That may be so, but to every serious spread bettor it is bad news as it reduces punter choice. City have found, like the "traditional" bookmakers before them, that this form of betting is tough. They were consistently the slowest to update their "live" prices on Teletext and they did not have a freephone number for clients to call – a small point maybe, but indicative of an unwillingness to go the extra yard.

If it seems that this relatively new mode of betting is contracting uncontrollably, that is not the case. This week saw the entry of Cantor, who began offering spreads on financial markets in May 2000, to join City, IG, Sporting and relative newcomers Spreadex. Cantor was understandably jubilant about the disappearance of a competitor, a move which their managing director, Lewis Findlay, said was "the worst kept secret of recent times".

For all Cantor's marketing – they back Kieren Fallon and plan to sponsor every race at every race meeting on one day this year – few can bet on their small number of markets because rumours of City's demise inspired them to bring their launch forward by a month. This caused delays in the sending out of application forms to new clients, so Findlay's target of 5,000 accounts by the end of the year may prove optimistic.

He was probably closer to the mark earlier this year, however, when he said that there would be only three spread-betting firms by the end of 2002. Wally Pyrah of Sporting, who describes the current position as "three and a half", agrees.

"It says a lot when companies like William Hill and Ladbrokes came in – and there is no bigger bookmaker than Ladbrokes – but couldn't hack it and gave up," Pyrah added.

IG's Paul Austin also believes that five is too many firms for the market to bear. "We're biased, but if you asked anyone at Sporting or IG then we wouldn't see that as a particular problem because we've both grown our businesses," he said. "When we took over Ladbrokes to be No 2, and then Hills to be a closer No 2, it did mean the others were fighting each other for third place. If you look back five years it was probably Sporting first and everyone fighting for second."

Meanwhile Spreadex have cut back their range of markets and given up their text page on Sky – a facility that should be considered essential with all the live sport shown on that channel. Indeed, the satellite company provides a good analogy for City's demise. As with Sky taking over BSB to form BSkyB, it is a "merger" in nothing but name.

An option has been taken away from those punters who are constantly looking for an edge through the small differences of opinion between the spread-betting firms. As Findlay said: "It is a sad day for the spread bettor, who thrives on choice and, most importantly, on value."