The financial bookie Cantor Index has launched the first financial spread betting exchange alongside its long-established sports exchange.
The exchange allows retail punters to trade against each other on the daily movement in the FTSE 100, property prices and interest rate decisions.
Like traditional spread bets, punters have to decide to either "buy" the spread if they think the FTSE 100 will close higher or "sell" if lower. Winnings or losses are calculated by the size of their stake multiplied by the number of points higher or lower than the spread.
Because the prices on Cantor's Spreadfair exchange are not determined by the bookmaker - instead being set by the people who bet - the difference or spread between the buying and selling price is minimal. However, Cantor will charge winning punters commission of between 3 and 5 per cent on their winnings at the end of any trading day.
For example: If a punter bought the FTSE 100 for £10 a point at 6211, they would have made £265 if the FTSE closed at 6227.6. The winnings are 26.5 points multiplied by £10 stake to make £265. However, selling the FTSE at 6211 would produce a loss of £265, although there would be no commission charged.
The minimum bet size is £1 a point, and like any spread betting product losses are potentially unlimited. However, the exchange enables users to close out their positions before the close of a trading during the day to either bank a profit or crystalise a loss.
The company plans to add bets on Wall Street and the gold price in coming months, and is in talks with FTSE, which compiles the FTSE 100 index, and the London Stock Exchange over introducing bets on single shares.
Because the winnings are considered as gambling profits they are free of tax, and there will be no stamp duty to pay when the bets on individual shares are launched.
Andrew Garood, recently made joint managing director of Cantor Index, said: "We believe this to be a revolutionary product for the retail investor, who can now gain cost-effective exposure to movements in the FTSE on a daily basis.
"One of the good things about the FTSE is it reliably moves every day, but unlike in some sporting events, such as cricket, the spread does not move so much that you get absolutely cleaned out."
He added: "Betting exchanges have grown exponentially in recent years and yet until now there has never been a way for private investors to establish easily the price at which they are prepared to trade or to take a price which they are comfortable."Reuse content