Do spread betting firms close down winning accounts?

Do brokers close winning accounts?
Written by David

Just wondering if spread betting firms close down accounts of people who win more on their spreads than they loose?

Well, a normal sports bookie would definitely limit your stakes to pennies if you start winning money from them on a consistent basis, but this is not applicable in financial spread betting, and while closure of accounts may happen with people who actually place sports bets against a bookie, the spread betting model is different in that it is a bit like an exchange model similar to Betfair. This means that they don’t need to close any sports accounts because irrespective of whether you are a winner or a loser you are still making them money (at least that’s the theory…)

When you make a financial spread bet, the spread betting company takes the spread in between and the other side is usually NOT the spread company so if you win the spread betting company doesn’t lose. It has been known that spreadbetting companies take the other side of a trade from time to time but 90% of the time its an external party so its in the spread betting company’s interest for you to make money so they can continue taking the spreads from your trades.

Of course with a deep market like foreign exchange they need to keep the spreads narrow (to compete) and they may not look well onto strategies like scalping where it is hard to transfer the risk from their books to the underlying market. Ergo, so of course some accounts may be labelled undesirables; depending on the trading style. But if you trade longer term and in stocks or futures then you shouldn’t have a problem I’d say. In a nutshell it’s like every other business – they don’t want to know or deal with you if you are costing them money.

About the author

David

I first cut my teeth in the Square Mile in the winter of 2002. I was young, fresh-faced and straight out of university; keen but maybe a little naïve about the way the investment world really worked… A few years ago I discover a whole new world of opportunity: spread betting on the financial markets.

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