City Index Sold to Gain Capital – the start of the market consolidation?

It’s hardly surprising really that City Index has been sold.  Michael Spencer founded the firm in 1983 in the heyday of financial spread betting.  Spreads were wide, and the public were more or less blinded by the access that the new type of financial gambling gave them.

Over the years though it is possible to set up a new spread betting business with zero capital, zero regulation and zero experience.  All you really need is a marketing plan and one of the spread betting white label providers to take your seriously.

So is this the beginning of the industry contracting?  It’s no secret that spreads are now so razor sharp that it’s a wonder anyone is making any money on the spreads.  Brokers can still get away with charging overnight interest of around 3%.  But, with more traders day trading in index and FX and not running long and costly margin equity positions clearly broker revenues are going to be down.

Apparently half of the revenue comes from the 100,000 or so active spread bettors in the UK, while having strong foothold on the Asian market too.

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