Spread Betting Down
By the looks of things, spread betting in the United Kingdom has indeed become a popular choice for many traders as evident in numerous Premier football club’s apparel and countless broadsheet newspaper and advertisement. But the truth is far from what financial spread bets and other similar retail derivatives are currently facing.
Trading volumes are suppressed, costs are rising above stable levels and some operators have already waved their investments conceding that the environment is due to acquisitions. If smaller operators still can’t afford to contract and upgrade IT platforms on marketing then the bigger the company is the more it needs to spend on technology investments.
Technology is considered a vital key strategy for spread betting operators which compete on the momentum and user-friendliness of their interface and trading platforms and trading with the use of mobile devices such as smart phones, tablets and laptops accounts for nearly a fifth of their revenue.
UK operators are searching for new markets for their expansion as their pool of active patrons and their current revenue are presently declining at a steady pace. Analysts agree that this circumstance is actually a case by case situation and due to the up-rise of several spread betting platforms which traders are noted to use more than one.
Unlike many of their clients, these operators are more likely to deal if the market remains in a calmer state, but should volatility remains at a low; chances are consolidation will greatly accelerate. Moreover, if continued low volatility exists in the market then difficulties will surely arise and depress trading activity.
Punters and the likes have been wasted away from the much desired movement in the share prices that will lead to opportunities to make money for many investors. With the Vix index of volatility being at a low for nearly five years, as a result they are trading less than expected.
The spread betting industry hit a wall of problems lately because they are barely earning especially when volatility is soaring high. Now that activity is at a low their cost are ironically high.
Even big names who run Capital Spreads and Pro Spreads are incurring pre-tax statutory loss of £2.1m last year despite profiting £6.1m a year earlier.
Even the UK’s top performing spread betting operator in terms of sales is heavily scorned by deficits. Its pre-tax profit in the past six months was down 21 % on the previous year while its revenues sharply dropped by 14 % as well. Analysts believe that there are simply too many operators pursing a limited pool of betting proprietors which is highly attributable to the unaccountable losses of so many.