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Spread betting is very risky, and losses can rapidly pile up. Clients are vetted to ensure they can handle the worst. "We don't want any widows and orphans," Murray says. While the hard-core clients tend to be financial pros and experienced investors, the expanding market is attracting less sophisticated bettors.
Four firms engage in spread betting in Britain, and the arrival last May of the Cantor Index, a subsidiary of American brokerage Cantor Fitzgerald, has further boosted the industry. Cantor boasts it will have 10,000 accounts by next May, helped by the migration of spread betting to the Net. David Buik, head of marketing at Cantor, predicts that within two years 70% of the market will be Web based. Though tax and gaming laws tend to be tougher on the Continent, Buik says spread betting will cross the Channel within a couple of years.
Still, it's unlikely the trend will take much business away from established brokers. "Spread betting doesn't replace a long-term investment strategy," says Ed Nicholson, head of financial marketing at City Index. For one thing, a spread position can be kept, at the longest, for just six months. But brokerages will probably move into spread betting following Cantor Fitzgerald's lead. If they are right, the line between broker and bookie may be blurred forever.