Do you want to know how spread betting companies make money?
Written by Will Peters Wednesday, 05 October 2011 15:29I believe this snippet of information will not be found on anywhere else on the internet - you read it at Comparing Spread Betting first!
This is perhaps the most concrete insight into how spread betting companies make their money.
An equity research note published on spread betting company WorldSpreads by Edison Investment Research shows where the company derives its income.
Because existing UK spread betting companies are essentially homogenous this snippet of information provides perfect insight into how the industry in general derives income:
- 60% of revenue comes from the spread income generated from over 2,000 active clients.
- 20-25% of revenue comes from market making and managing the exposures created by customer dealing.
- And 15-20% from charges where, for example, clients hold positions overnight.
And on what markets do spread betting betting companies make their money?
The research into WorldSpreads shows that the company offers spread betting on over 4,000 instruments.
The split of revenue is 60% equity markets, 25% currency, 10% commodity and 5% interest rate products. While there is some correlation of volatility between these markets, this spread of business helps diversify income.
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