The Origins of Spread Betting

Posted By Robert On Monday, May 4th, 2015 With 0 Comments

Financial spread betting was once the financial tool of a select group of city traders. This financial phenomenon introduced to the city just 40 years ago by a man called Stuart Wheeler has made many on the right side of the spread huge sums over the years.

Mr Wheeler introduced this form of financial trading to a group of friends allowing them to speculate on the forthcoming weeks gold price. The gold boom of the late seventies caused sparks to fly as city traders got wind of potentially huge returns available through this new form of financial speculating.

The demand by city traders prompted Wheeler to open the first ever spread betting company known today as the IG Index but formally as the Investors Gold Index. Spread betting was born and for several years IG Index held a monopoly over spread betting been the sole supply of this service.

Commodities, currencies and indices were added to the range of instruments available by spread betting firms which lead to continual growth throughout the 80’s.

The 1990’s saw spread betting take off with the introduction of the internet. Spread prices could now be relayed to punters in real time, trades could be opened and closed much faster and more and more products became available through one platform. Private investors began to get wind of this lucrative form of investing seeing an increase in the number of people trading spreads this was also fuelled by the introduction of shares and just about every other financial instrument available. Find out more here..

In the beginning

Although some experts have suggested that financial betting originated from bucket shops in the U.S. in the early 20th century, the general consensus is that it was the brainchild of a man named Stuart Wheeler in 1974.

An out of work stockbroker and kicking his heels for something to do, Wheeler hit upon the idea of letting his friends speculate on the price of gold. Originally set up on a weekly basis, his associates could bet upon whether they thought the price would rise or fall compared to the buy and sell prices that Wheeler had set.

Gathering momentum

With only an elite group of wealthy investors able to purchase bullion, Wheeler’s system allowed everyone to benefit from the sought-after precious metal and word soon spread across the City. The entrepreneur expanded his betting programme to allow access to anyone who wanted to dabble. Soon, demand became so high that it was necessary to create a formal index, namely IG Index.

IG Index became the first financial betting company to be created and for many years was the sole provider until the popularity of this form of trading spawned the birth of several others. Gold remained the only commodity on the IG Index for the duration of the 1970s and enjoyed a boom in the market. However, Wheeler realised that in order to capitalize, it would be necessary to roll out the concept to other markets, a plan that he brought to fruition by the 1980s.

Bigger but not better

But despite expanding financial betting to include other commodities, major indices, options and currencies, the market remained confined to professional speculators only. At this time financial betting was not available on stocks and bonds, which were concepts most amateur investors were more comfortable with. The available markets were simply not attractive enough for the general public and were for most people, a frankly quite daunting prospect.

The other problem was that technology had not kept pace with the imagination of financial betting companies. Financial betting was and still is, a fast market and demands a constant stream of information, with traders needing immediate updates to make the right decision. The portal to transmit that information in a readily understandable form was not yet available and was a major obstacle in drawing private investors into the market, despite the FTSE boom.

The solution arrives

However, the creation of the internet sparked a revolution in the world of financial betting and was to form the basis of a whole new wave of investors. Created in 1992, within two years, there were 400,000 hosts on the world wide web and interest in the technology was soaring.

Financial betting firms were not slow to catch onto this and soon realised this was the opportunity they had been waiting for to capture the market. By making their information available online, firms were able to reach a whole new community of investors who would not have dreamt of considering spread betting before.

This increase in popularity meant that financial betting firms also had to ‘up the ante’ and to stay competitive. Many more markets started to be included, including the much coveted stocks and shares.

Throughout the 1990s financial betting slowly became part of popular culture, with much written in the press and media about this ‘new’ kind of investment that could bring substantial profits to the average person on the street.

After the rocketing demand in the 1990s, the market has reached a plateau but has not tailed off. With sports now also included as an option, the pursuit has reached all corners of the country and the UK remains one of the main hubs for spreads globally.

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