But I’ve heard that some spread betting operators play underhand tricks to get the upper hand?

For the most part I’d call it a scam in the same sense as a casino. The house has an advantage. They will play lots of games with you if you’re successful or resort to slippage or dealer referral. They’ll lock you out of the platform, quote your stop even if the market didn’t, things like that. Firms have even said that if you’re winning then they assume you’re cheating and that’s their excuse for locking you out. I don’t like dealing with market makers who are also principals to the trade – Tony

Well, if you trade the news or try to scalp you will for sure have problems. Otherwise, after many years of spread bet trading it is my experience that slippage is not a big problem. Constant referral to a dealer though, is a much more serious problem although it is less of an issue these days.

I think that due to technological limitations things may have been less than good in the past but most of the spread betting providers today are performing well and there has been a gradual shift in the right direction of treating clients fairly. Competition is the best way to keep spread betters competitive and deliver really good technology. If you look at spread bet spreads now they are very competitive. In fact private traders are today in a more powerful position than they have ever been when it comes to the cost of dealing.

A spread betting provider has to act as principal because he is a market maker. That means he is making the price of the spreadbet off the back of the underlying share. There is no way he can act as agent because without him, there is no one on the opposite side of the transaction. It is a legal requirement that he writes that he will be acting as principal. A spreadbet has EXACTLY THE SAME PAYOFF profile as a stock. It is not complex. It behaves in exactly the same way. And if you want to mention that they are leveraged, then so is a margin loan from any stockbroker. Barclays goes up one penny, the Barclays spreadbet follows up one penny, etc.

“Increased competition and regulation such as MiFID have been the main cause for this change in attitude, this in combination with more demanding and sophisticated clients makes me assure we are looking at a bright future for the spread betting industry.”