Best Spread Betting Broker 2023

Searching for a new spread betting trading platform can be overwhelming. Spread betting, even more so due to the high risks associated with this financial investment method. 

In this article, we have listed our favorite spread betting platforms. 

We give you a breakdown of the ins and outs of spread betting so that you can be more informed and decide if this is for you.

List of The Best Spread Betting Platforms 2023

Here is a list of the best spread betting platforms. When compiling this list, we considered the research and educational content provided regulation and ease of use. 

• Avatrade – Best Spread Betting Platform Overall
• Pepperstone – Best Low Commission Spread Betting Platform
• CMC Markets – Good Spread Betting Broker
• Spread EX – Best Spread Betting Focused Broker
• IG – Established Spread Betting Broker
• ETX Capital – Best Spread Betting Broker with Tight Spreads
• Markets.com – Good Spread Betting Platform

What is Spread Betting?

A spread is a difference between the buy and sell prices. The buy and sell prices are linked to the underlying market price. 

Spread betting is a derivative product you can use to wager on financial markets, like commodities, market shares, or forex. Traders can do this without taking ownership of the underlying asset. 

In simple terms, spread betting is when traders or investors place bets on whether they think the price of an asset will rise or fall. 

You should be aware that a spread bet is a complex financial instrument and comes with a high risk of losing money quickly because of the leverage. Spread betting requires a good understanding of how they work. We would not recommend spread betting to beginners. 

A major selling point of spread betting brokers is that generally, you do not pay tax on it. This is because spread betting is exempt from capital gains tax. Spread betting is also exempt from stamp duty since traders never own the underlying asset. 

How does spread betting work?

Spread betting involves tracking the value of an asset so that you can take a position on the underlying market price. Traders or investors do this without having to take ownership of the underlying asset. 

• Long and Short Trading – “Going long” is a term that is used when traders place a bet that the value of an asset will rise over a certain period. ‘Going short’ is the opposite. It refers to when a trader places a bet that the value of an asset will fall over a certain period. Investors or traders do this by opening a spread bet to either ‘buy’ or ‘sell’ the underlying market. Whether traders make a profit or loss depends on how accurate their prediction was. 
• Leverage – Leverage gives traders full market exposure at a fraction of the underlying market cost. For example, if you wanted to open a position on Apple shares, you would be required to pay the full cost of the shares upfront. With spread betting, you would only have to put down a deposit of a fraction of what the shares are worth. 
• Margin – A margin is an initial deposit an investor will put down to open a position. With spread betting there are two kinds of margins:
• Deposit Margin – A deposit margin is the initial amount required to open a position. This is generally a percentage of the total trade
• Maintenance Margin – A maintenance margin is the additional fees that might be required if the position a trader has opened incurred losses that are not covered by the initial deposit. Traders get a notification (a margin call) that will request a top-up of funds. If the trader does not top-up their funds, they run the risk of having their position closed. 

How to spread bet

Spread betting is a method of engaging in the financial markets by wagering on whether an underlying asset’s market price will rise or fall. If you think an asset’s price will rise, you would open a position to ‘buy’ and if you think the price will fall, you would open a position to ‘sell’. 

When opening a position to spread bet, you must put up a certain amount of money per point of movement in the underlying market. Your profit or loss would then be multiplied by this amount to get the final sum. 

An example would be if you opened a spread bet at £10 per point. If you predicted that the price would increase and the price increased by 10 points, you would earn £100 (10 x 10). If the price decreased by 10 points, you would lose £100. 

A fair warning, because spread betting is leveraged, it magnifies both profits and losses since these are calculated based on the full value of the position and not based on the deposit margin.  

Benefits

A key benefit we’ve mentioned is that it's exempt from capital gains taxes and stamp duty. 

Spread betting also has the added benefit of having the potential for high earnings. 

FCA Regulation

The Financial Conduct Authority (FCA) is a financial regulatory body based in the UK. The FCA operates independently of the UK government. It finances itself by charging fees from members of the financial services industry. 

The FCA is responsible for regulating financial firms that provide services to individuals. They also maintain the integrity of the financial market in the UK. 

The FCA regulates the conduct of both wholesale and retail financial firms. They work alongside the Prudential Regulation Authority and the Financial Policy Committee. These institutions set the regulatory frameworks and requirements for the financial sector.

What is Forex Spread Betting?

In simple terms, forex spread betting is a category of spread betting. Forex spread betting entails taking a bet on the price movement of currency pairs. 

It is common practice for the company offering currency spread betting to quote two prices, the bid price and the ask price. The bid and the ask are referred to as the spread. 

With forex spread betting, investors will bet on whether the price of a currency pair will be lower than the bid price or higher than the ask price. 

Narrower spreads are attractive because the transaction cost is lower. 

Forex spread betting allows investors to wager on the movements of currencies without having to transact in the foreign exchange market. 

Leverage and Margin in Spread Betting

Spread betting works by relying on leverages and margins. Spread betting allows investors to trade on leverage to gain a larger market exposure that might not have been possible otherwise. 

Trading with leverage has the potential to increase your profits but also increases your risk of loss. This is why we would advise you to make sure you understand the risks involved with spread betting. 

A margin is the number of money traders is required to have in your account to open a position on an underlying asset. Due to the risks associated with leverage trading, traders are required to have funds in their account which can be used to protect them against market movements. 

Markets To Spread Bet On

Due to the nature of spread betting, traders are given the freedom to access a vast range of markets such as commodities, bonds, foreign stocks, and currency pairs. Here is a brief list of all the markets open to spread betting:

Stocks

Stock trading is one of the most popular forms of investing. Purchasing stock shares give investors ownership interest in a company. This gives you the ability to share in the company’s profits. 

Spread betting on stocks involves betting on the rise and fall of stock prices. Since traders don’t own any of the stock they bet on, they do not share in the profits or dividends of the company. 

Commodities

Commodities are natural resources like metal, energy, and livestock and meat. Much like stocks, commodities can be traded on market exchanges. 

The prices of commodities are affected by things like weather, livestock illnesses, and natural disasters. Traders wishing to spread bet on commodities should be aware of how commodities are priced. 

Bonds and Interest Rates

Spread betting is also available on bonds and interest rates. 

Much like with stocks, traders will bet on whether the price of a particular bond will increase or decrease and earn a profit or loss based on the accuracy of their prediction 

They are numerous bonds issued in different countries that you can bet on. 

Forex

Foreign exchange (Forex) trading is a popular trading market. Forex trades the relative values of one currency against another. 

Traders can spread bet on numerous currency pairs. As with any other spread bet, traders bet on whether the price of the currency pair will rise or fall. 

Market Indices

Instead of betting on the price fluctuations of individual stocks, investors could choose to spread bet on market indices. 

An advantage of spread betting is that investors can place bets on foreign market indices as well as local stock indices. 

Sports

Spread betting on sports works differently than general spread betting. Investors spread bet on the outcome of a sporting event. 

Sports betting offers the same variety of financial spread betting due to the amount of sports events that exist. 

ETFs

Exchange-traded funds (ETFs) are portfolios of related investment assets. Unlike mutual funds, ETFs can be traded freely on market exchanges. 

ETFs lets traders invest in a range of assets which makes them popular among investors. 

How Do Spread Betting Brokers Make Money?

Since spread betting brokerage firms don’t earn a commission on spread betting, how do they make money? Here is a brief explanation of how spread betting brokers make money.

One of the ways spread betting brokers make money is by categorizing their clients into two categories called Book A and Book B. The clients in Book A are successful and the clients in Book B typically lose their deposits because of bad bets. 

What the spread betting broker might do is bet against the clients in Book B to take the winning side of the trade and make money. 

Another method that spread betting trading brokers might employ is making money by matching positions among clients and generating a profit from the spread. 

Spread betting brokers can also charge a holding fee when carrying a position overnight. 

How to Choose the Best Broker for Spread Betting

Here are a few things you should consider when choosing the best spread betting broker:

Regulation

Spread betting is a risky business and it is important to choose a broker that is regulated by a financial firm or institution.  Regulation aids in protecting your money and assets against fraud. 

What can you Spread bet on?

Before choosing a spread betting broker, it is important to check out the variety of markets that are available for spread betting.  It is good to have a broker that offers a variety of markets if you’re an active trader. 

Costs and Fees

Spread trading can be costly and so you should check the fee structures offered by brokers. We would recommend that you choose a brokerage with transparent fees to avoid hidden costs. 

Platform

Generally, the best spread betting brokers offer platforms that are available online, via desktop and a mobile app. We recommend you choose a spread betting broker who offers all three since it offers convenience, especially if you have a busy lifestyle.

You should also check out the trading and research tools offered on these platforms as this can impact your trading strategy. 

Customer Support

Spread betting brokers should offer customer support that is quick to respond and effective in aiding clients. 

It is common for spread betting brokers to offer live chat, email, and phone call customer support. 

Benefits and Drawbacks of Spread betting

Here are a few of the benefits and drawbacks of spread betting:

Benefits

• Commissions are not charged on spread betting since spread betting firms earn money through the spread. 
• Spread betting is tax-free and does not need stamp duty fees.
• With spread betting, margin costs can be as low as 10% of the total value of the underlying asset. The rest of the funds are borrowed using leverage. 

Drawbacks

• Spread betting can be risky due to the leveraging. 
• It can be costly if traders decide to spread bet via day trading. Day trading can incur additional costs.
• The price quotes of contracts can be higher than the underlying asset since the spread betting broker sets them. 

Having Multiple Spread Betting Broker accounts

There is no law preventing traders and investors from having multiple broker accounts. Having multiple spread betting broker accounts can be tempting. Choosing a spread betting broker can be difficult, so why choose at all? As tempting as it could be, here are some pros and cons you should consider before deciding:

Pros

• You can enjoy all the perks of every brokerage account
• Having multiple accounts gives you access to trade currencies of different countries
• You can gain access to a plethora of market exchanges which is great if you’re looking to diversify your profile

Cons

• You will need to learn the ins and outs of multiple accounts which could be an adjustment. 
• You could incur additional costs since each spread betting broker has its fee structures
• It will take more effort and time to manage multiple accounts efficiently 

Types of Accounts

The types of accounts available for spread betting are dependent on the brokerage and platform you choose. Account options vary from one spread betting broker to another. Our advice is to research and choose an spread betting account type that suits your needs and trading goals. 

FAQ