The large spread betting group, IG Group, is predicting a thinning out in the ranks of spread betting exchanges. Their theory is that the new Financial Services Authority (FSA) regulations mean that the spread betting groups are going to need to keep large amounts of cash on hold and that the small players will not be able to do this.
To quote the saying; he would say that, wouldn’t he? IG Group is a large player in a sector where there’s not that much obvious advantage for a large player. Sure they’ve got a brand, but in something where the spreads matter the most anyone with an internet connection can start looking around (and remember, we do provide the best service on the market for comparing these spreads). Well here’s a perceived advantage, keeping cash. A big player will build up those cash reserve more quickly.
Perhaps. However in a market like spread betting, and contracts for difference, there are always new players coming in and leaving. They usually do come and go for one reason, whether or not they can make a reasonably safe profit in the market. Of course cash reserves may make a profit a bit more elusive for some as their margins decline. However these are probably marginal players who would have struggled to stay in.
The new FSA regulations will affect spread bettors in that the FSA are demanding higher cash reserves across the sector. This will mean that spread betting exchanges, big and small, will have to raise spreads to build these cash reserves. Sorry about that.