To trade anything in ‘real time’ means that you are able to see price movements almost as instantly as the event occurs. This requires not only incredibly fast software and charting packages but also huge automated programmes which can react faster than humans to waves of incoming information. Luckily for spread traders and even luckier for spread betting companies all modern brokers possess these tools and can provide price information within a tenth of a second to thousands of traders around the world.
Let’s consider what would be the problem if spread betting didn’t occur in real time and if their reaction was somehow delayed by a few seconds. The delay would result in exploitation of this information delay and could result in huge potential losses for the firm. Real-time information is, however, not always associated with trading; if we consider the common 15 minute delay in stock prices by some providers and the fact that Reuter’s subscribers get access to important news releases 2 minutes before the rest of the trading community. It is only with the demand by traders and the development of new trading technologies that real-time charts and information can be made available to create an equal market.
Spread betting is at the forefront of information processing. Many beginners notice how the price of a stock, commodity or currency may not be exactly the same as that quoted by the underlying market. This is because the spread betting firm often uses the futures market to updates its price quotes. Since the futures prices update frequently and do not rely on the quoting of prices, as the underlying market will have to, it is often these prices which are used and cause a discrepancy between the real-time price and the price quoted by the spread betting firm. Prices used by futures markets are also manipulated by the ‘fair value’ calculation which broadly balances the future prices against interest and that would have been accrued had the investment been placed in an interest-gaining depository.
Many spread betting firms try to get as near to the real-time underlying market price as possible. This allows traders to trade in the knowledge that market movements will be reflected honestly in their charts. Some brokers do, however, provide real time data to their charts which reflect the market price of the underlying asset. IGindex, for example offers real time tick charts as part of its advanced charting package which can be viewed in a window alongside the charts. CMC Markets also offer real time charting as a standard feature of their award winning ‘Marketmaker’ charting software. This claims to allow spread betters to get as close to the underlying market price as possible without experiencing the slight differences of the futures pricing system.
ProSpreads also offer a real-time spread betting service and claim to be the most accurate available. The demand for real-time data based on the underlying market is clearly pushing spread betting companies to develop faster and more responsive technology to keep up with this. The fear that delays can give someone an advantage over the individual trader is a major driver of this. However, spread betting is a derived market and, as such it will always operate somewhere outside of the exact pricing of the underlying market purely by the fact that the real time spread is often an added to by the spread betting company. This will make it fractionally different although the degree to which this interferes with the overall trading experience may be negligible.