Magazine article The Spectator

Toys for Boys Who Play the Markets

Magazine article The Spectator

Toys for Boys Who Play the Markets

Article excerpt

Twelve years ago, on a rainy afternoon when nothing much else seemed to be happening, I abandoned my desk in Canary Wharf for a few hours in order to track down a new and obscure betting operation somewhere off the Mile End Road. The managing director was a large, florid man in his late forties. He smoked a succession of fat cigars and looked the picture of ill-health.

No medically-minded betting man would have offered better than evens on his survival into the new millennium.

The business he ran belied his appearance however. The office, in a quiet cul-de-sac, was newly fitted out and spotlessly clean.

The trading screens were impressively up-todate and there was a buzz of excitement. It all pointed to the presence of serious money behind the operation -- which, so my host hinted more than once, there was.

I had alighted on a spread-betting firm, whose primary function was to offer its clients -- then mainly City professionals -- the opportunity to make leveraged bets on movements in financial markets. All deals were done over the phone -- no deadbeats cluttering the hallway here. The clientele, I remember, included a surprisingly high proportion of South Africans. 'What you're seeing here, ' Mr Unhealthy insisted, uncorking another bottle of Chablis, 'is the start of something big. Spread betting is the way all smart people are going to trade in the future.'

Having long since lost that bet on his own life expectancy, my host is not around to see the day, but his prediction was pretty much spot on. Spread betting and its posh-sounding sister, trading contracts for differences (CFDs), have become the medium of choice for many 21st-century financial punters. So much so that IG Index, the largest spread betting firm, boasts a market capitalisation of £890 million, ranking it as the 240th most valuable company on the London Stock Exchange.

Its business, according to its latest results, is growing at more than 50 per cent per annum.

City Index, IG Index's main rival, is also growing fast. It has been owned since 1998 by Michael Spencer, the very rich and famously short-tempered founder of the moneybroking firm ICAP, who was recently appointed treasurer of the Conservative party. By a nice irony, Spencer may find himself talking donations with Stuart Wheeler, founder of IG Index, who has been the party's most visible donor in recent years, having sold his IG shares for £30 million or so in 2003.

According to Clive Cooke, the (very healthy-looking) chief executive of City Index, his 25,000 clients now include not only City types but a good number of private individuals, many from the professions and an increasing number from overseas. Doctors and dentists are among the most active: if you find it difficult to get an early afternoon appointment in Harley Street, it may be because 2.30 pm, when Wall Street opens, is one of the busiest moments in the trading day.

'The average client, ' says Cooke, 'is 25 to 55, predominantly male and middle class, but not super-rich.' Having an account with a spread-betting firm is about having fun as well as making money, he reckons -- which figures, because although he won't be drawn on precise figures, it is common knowledge that the majority of punters who trade in financial markets normally lose money over the course of a year.

It is not hard to see why spread betting and CFDs have proved so popular. …

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