What is Spread Betting?

Financial Spread Betting is a tax efficient 1 way of trading on global financial markets. You do not buy or sell the actually physical product or market, but merely ‘bet’ on the price of that market moving in a certain direction. Under current UK legislation, any profits made from spread betting are free from Capital Gains Tax (CGT).

When spread betting on equities, as you are not physically buying or selling the stock as you would with a stock broker, you are simply betting on the stock’s price movement. You do not have to pay stamp duty, although this is subject to change and does not apply to Irish stocks.

Spread betting is margined or leveraged trading product. This means that you only have to put up a fraction of the total notional amount of the trade. For example if you wanted to trade in £100,000 worth of Vodafone shares then if the margin was set at 5% for that stock then you would only need to have £5,000 on deposit initially.

The Growth of Spread Betting

Financial Spread Betting began in 1974 when Stuart Wheeler started a company that offered clients the ability to place bets on the movement of the Gold price, at a time when exchange controls made it very expensive to purchase the underlying metal.

Stuarts Wheeler’s company was the sole spread betting company for 9 years until Jonathan Sparke launched the first sports spread betting company in 1983.

In the last 26 years the market has grown substantially and spread betting is now one of the fastest growing areas within the financial markets, providing clients with the opportunity to speculate on world financial markets in a tax efficient way. Current estimates suggest that there are now around half a million spread betting accounts in the UK with many Spread Betting and CFD companies claiming to offer a service.

GKFX Financial Services, although a relatively new entrant to the market, was set up and is run by a management team of highly experienced individuals, some of whom have spent over 20 years working in the City and understand all areas of this industry, and in particular the needs of the customer. Where some of our competitors treat customers just as another number, we appreciate the importance of a customer and endeavour to make their whole experience of dealing with us a satisfying one.

GKFX Financial Services is based in London and regulated by the FCA. We understand the importance of providing our clients with the security and peace of mind of knowing they are dealing with a fully regulated firm particularly after all the recent turmoil in the financial markets. For that reason we are not based off shore and have passed the rigorous controls set by one of the world’s premier regulatory authorities.

Markets

We offer a large range of markets that can be traded on the world renowned MetaTrader trading platform. Due to the constraints of this platform we are unable to offer thousands of markets, so have instead chosen the most popular ones from various areas of the financial world.

There are approximately 100 Foreign Exchange currency pairs, Global Indices and Commodities as well as a large selection of shares from the UK, USA and Europe. To view our entire product range, please view our Market Information Sheets (MIS).

No Hidden Charges

We do not charge any commission on spread betting. The price you see is the price you get 2. We make our money from the spread, which is the difference between the Buy price and the Sell price. We endeavour at all times to keep this spread as low as we can to remain competitive and to help clients minimise their dealing costs.

All rolling financial spread bets are subject to overnight financing. If you are long a bet (ie you have a bet on where you win if the market concerned goes up) then as you have only put up a fraction of the actual value of the bet then you have ‘effectively borrowed’ the balance. For this we charge a financing charge of 2% above the overnight borrowing rate for the currency concerned.

If you had gone short on a bet (ie you have a bet on where you will win if the market concerned goes down) then you have effectively deposited the entire value of the bet with us and will receive financing which is the overnight lending rate minus 2% (subject to a minimum of 0%).

With spread betting you are betting on the price movement of the market. So for example if you thought that Vodafone was going to rise then you could buy Vodafone (place an up bet) at 150 pence, for example say £5 a penny movement. If it went to 160 pence you would make £50 profit (160 — 150 x £5). If the price fell though, to say 140 pence, then you would lose £50.

Please make sure that you have read our Risk Warning to make sure you understand the risk involved. If the price continues to move against you then you could lose substantially more than your initial investment.

Spread Betting Example 1 — Foreign Exchange

Let’s say you have a view that the Euro/US Dollar foreign exchange rate is going to rise. This means that you expect the Euro to get stronger and the US dollar to get weaker (the first currency in the pair is the known as the base currency and it is in terms of that currency that you decide to buy or sell).

The margin requirement is 1% which means you can trade 100 times what you have in your account. If you have £2,000 in your account, and the current GKFX price for Eur/Usd is 1.3550 — 1.3552, then in this example you could trade up to £16.90 a tick move on the price, a tick being a 0.0001 move. This is calculated by (£2,000 / 1%) x 1.3552 = $27.10 a tick. With Gbp/Usd at 1.6000 this is the equivalent of £16.90 a tick ($27.10 / 1.6000).

So let’s assume that you decide to Buy £5 a tick of Eur/Usd. The following are examples of what could happen. Note: When you buy (or bet that a market will go up) you are dealing on the higher price, and when you sell (or bet that a market will go down) you are dealing on the lower price.

OUR QUOTE FOR THE EUR-USD IS 1.3550 — 1.3552

YOU BUY £5 A TICK OF THE EUR-USD AT 1.3552