Many traders consider financial spread betting to be a recent trading phenomenon, but it actually came about in the 1970s.
The popularity of spread betting has snowballed ever since, particularly following the introduction of online and mobile trading platforms. Here, spread betting provider City Index takes a look at some key stages in the rise of financial spread betting.
Spread Betting History: 1970s: Conception
Financial spread betting was introduced in 1974, the brainchild of unemployed stock broker Stuart Wheeler. He came up with the idea of an index that would allow his friends to trade on the price movements of gold without ever having to actually own the expensive commodity at any point.
Wheeler set a 'sell' price and a 'buy' price and invited his friends to speculate on whether the index will go up or down over the following week. Word soon spread and interest in financial spread betting convinced Wheeler to expand his idea into a spread betting company called IG Index. He then introduced a wider selection of financial markets for traders to spread bet on.
Spread Betting History: 1980s: Growth
The economic boom paved the way for more spread betting providers, the first of which was City Index in 1983.
While spread betting was growing, it was still a very niche form of trading. Only a very small percentage of the population had embraced it. This was partly because the financial spread betting companies were only setting prices for commodities, currencies, options and indices, whereas the public at the time were used to investing in familiar stocks and bonds.
Another drawback was the lack of technology available at the time; a deficiency detrimental to both trader and spread betting provider.
Spread Betting History: 1990s: Mainstream
With the 1990s came the beginning of the technology boom and spread betting would never be the same again.
Dotcom shares flew upwards and global stock market activity became front page news. All of this helped financial spread betting to draw a more computer-focused, younger generation of traders.
Over time, spread betting went on to reach across most major financial markets, from shares to futures. With high market volatility at the time, spread betting offered an attractive and shorter-term alternative to physically buying and selling shares, cementing its place in mainstream trading.
Spread Betting History: 2000s: Advancement
Faster computers and online trading platforms came about around the time of the turn of the century. These allowed financial spread betting providers to cover more markets, more data and more competitive spreads and real-time prices.
This made spread betting available to the average investor and sparked another boom for the industry. Spread betting providers such as City Index have since launched live iPhone™ spread betting and other mobile trading platforms, turning trading into something that one can carry everywhere.
How spread betting will evolve over the next decade is anybody's guess.
Spread betting and CFD trading carry a high level of risk to your capital with the possibility of losing more than your initial investment and may not be suitable for all investors. Ensure you fully understand the risks involved and seek independent advice if necessary.
Content approved / provided by City Index Limited which is a company registered in England and Wales, number: 1761813. Authorised and Regulated by the Financial Services Authority. FSA Register Number: 113942.
Note - Spread Betting carries a high level of risk to your capital and you can lose more than your initial investment, it may not be suitable for all investors. Ensure you only speculate with money that you can afford to lose and that you fully understand the risks involved and seek independent financial advice where necessary.
'Spread Betting History', Review by D. Jones, last update: 2-Mar-11
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Risk Warning:
Spread Betting carries a high level of risk
to your capital and you can lose more than your initial investment,
it may not be suitable for all investors. Ensure you only
speculate with money that you can afford to lose and that you fully
understand the risks involved and seek independent financial advice where necessary.
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