Simon English: Why is the dark art of spread betting thriving?
Friday 15 June 2012
Outlook The spread betting sector has still yet to firmly shake off the idea that somehow it is up to no good. In some minds, just the words "betting" and "tax free" conjure up dark images. Playboys on speed boats, perhaps, slicing through Geneva waters while Granny Smith loses her savings on punts she does not understand.
An alternative view: this industry is the City of London at its innovative best. If in the past it has attracted the wrong sort of clients, these days it's firmly a deal between consenting adults who understand the risks they are taking and can mostly afford to lose what they bet.
The recent disaster at WorldSpreads – it went under, is under investigation, and client funds are seriously under water – has hardly helped perceptions, but such disasters are not limited to spread betting.
IG's year-end sales figures yesterday show a business in rude health despite (because of?) the chaos in financial markets.
Moreover, there's a chance they have hit upon a highly unusual business model.
The statement says that profit margins remain at 50 per cent (in English: it makes 50p from every £1 of revenue). In most industries that margin would be eroded by competitive price pressures. In this one, says chief executive Tim Howkins, every time they cut supposed profit margins by narrowing spreads, the level of activity simply goes up and margins say the same.
This can't last, you'd be tempted to say. But it has for many years at IG. What other industry can claim such a success? Mr Howkins can't think of one, neither can I. Suggestions welcome.
- 1 The difference between a migrant and refugee, in one sentence
- 2 Miley Cyrus calls out hypocrisy of women’s nipples being taboo
- 3 iPhone 5c to be discontinued, no iPhone 6c to replace it
- 4 Jozef Wesołowski: Former Catholic archbishop found dead ahead of child sexual abuse trial
- 5 Blood Moon and Supermoon: September to bring brightest – and dimmest – full Moon of the year on same night
Spain accused of 'provocation' after letting Russian submarine refuel off Gibraltar
Allonautilus scrobiculatus: World's 'rarest' creature spotted for only the third time ever
Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me as naked as possible, but I got the heat because I’m a woman’
Miley Cyrus calls out hypocrisy of women’s nipples being taboo
Celebrity Big Brother 2015: Tila Tequila kicked off show after 'describing Hitler as a good man'
Climate change: 2015 will be the hottest year on record 'by a mile', experts say
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
Iain Duncan Smith calls for urgent ESA overhaul as part of drive to cut down welfare costs
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...