The History of Spread Trading

Spread betting (or spread trading) began in the early 1970’s when a group of investors began to predict what price gold would be set at for the following week. Each week a spread was set and if they thought the price would go up they would buy the price and if they thought it would go down in price they would sell the price. This is how it all began. Spread trading was only offered on Gold through the seventies.

Seeing the potential for more business spread trading expanded into a few other markets in the 1980’s such as the major indices, currencies and commodities. However due to lack of technology it was difficult for the average investor to acquire in depth knowledge of these markets in order to call a direction and so the volumes of trading remained low. The internet opened up the world of speculation and investment to a new dimension.

With the advancement of technology in the 1990’s and then the internet in the early 2000’s momentum for spread trading grew rapidly. For the first time spread trading companies were efficiently able to offer more products, up to date pricing, historical data, charts, keen spreads and online trading platforms.

All this meant spread trading was now available to the average investor who took advantage of the opportunities being offered and so the numbers of customers (traders) increased dramatically which meant volumes increased also. Spread trading companies and traders fed off one other and now you can trade on almost every sort of financial instrument.

This advanced spread trading enormously as finally there were systems available which allowed the individual trader to keep up with the fast paced changes of the markets and be able to take advantage of a price at any given moment by trading directly online. A natural extension of this trend has been the spread of online trading platforms for private traders’ use. Just like institutions, retail investors now had real-time access to trading individual shares, funds and derivatives. As more and more investors resorted to do their own share dealing, this put up the pressure on conventional stock brokers, who have historically relied upon old-world media to buy and sell securities for their clients.

Electronic trading has today became the investment industry norm and there are few ‘open outcry’ stock exchanges remaining. The advantages of electronic trading to investment banks and stock brokers are pretty obvious: speed, efficiency of pricing and liquidity. Meanwhile, spread betting has grown into a recognized and established investment opportunity where many individual traders are enjoying the substantial rewards and high returns on their money.

“Today, independently minded and technologically astute traders and investors are able to empower themselves to become as involved in the investment process as they feel necessary.”