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A user has asked: Do spread betting companies close your account if you win?
This question comes up quite a lot, because financial spread betting contains the word betting people assume that like bookies brokers don’t want their clients to win. But it’s actually quite different. When you spread bet on the markets your trade is simply structured as a bet so you don’t have to pay capital gains tax on profits and also so you can trade an “amount per point” rather than a certain amount of shares or contracts.
Will a spread betting broker close your account if you win?
The answer, in short, is no.
We’ve previously covered why spread betting brokers want their clients to make money, as a long term client can generate significantly more revenue for the firm than a client who only lasts a few weeks.
You are also not always betting against your spread betting broker as you would do with a traditional bookie. Yes, some spread betting brokers do operate a B-Book where they profit when clients lose money. But unlike traditional bookies, brokers are able to make money when their clients make money too.
What do the spread betting brokers have to say about closing winning accounts?
When we interviewed June Felix the CEO of the largest CFD and spread betting broker IG, she made it quite clear that IG (read our IG review) likes to have their interests aligned with their clients. Whilst other brokers may look to profit from client losses IG aims to hedge as mush order flow as possible and generate revenue from transaction and financing fees.
Matt Brief, Chief Product Officer at IG Group said.
“IG aims to deliver a sustainable business by hedging well over 99% of our clients volume – either internally or externally. Unlike others, IG’s business model ensures that our interests remain aligned with our clients, who we want to trade profitably. It’s our job to deliver our clients a world-class trading experience by providing leading market content and round the clock access to trade over 17,000 global markets.”
Chris South Head of Client Management at CMC Markets had this to say:
Our aim at CMC Markets is to build long-term relationships with our clients by providing them with the best possible trading experience, through our technology and customer service. We want our clients to be successful and to trade with us for many years, so there’s no reason we would want to close winning clients’ accounts. Winning clients are happy clients, and happy clients are great ambassadors for our brand.
In addition, our income comes mainly from our spreads (which clients pay on each trade), so if our clients are winning and continuing to trade actively, we’re successful. What’s more, if our clients are trading successfully, we know we’re succeeding in providing the service and tools they need.
How do spread betting brokers make money?
Financial spread betting brokers make money in three main ways:
- Widening the bid-offer spread
- Overnight financing of open positions
- Not hedging client orders through the b-book
The difference between spread betting brokers and bookies
This is in contract to sports spread betting bookies, like Spreadex and Sporting Options. They make markets on sports where there is no underlying market so the only way they can make money is when the clients lose. However, just because you win it doesn’t mean they will close your account.
There are occasions when spread betting firms will close your account, namely market manipulation, anti-money laundering and so on, but it’s highly unlikely that they would close your account just because you win!
Are you looking for more about spread betting?
Good Money Guide can help. Here are tips on how to spread bet successfully and a piece explaining the main reasons why most spread betting clients lose money.
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Richard founded the Good Money Guide (previously Good Broker Guide) in 2015 and has been a broker for 20 years most recently at Investors Intelligence and previously a multi-asset derivatives broker at MF Global (Man Financial). Richard started his career working as a private client stockbroker at Walker Crips and Phillip Securities (now King and Shaxson) after interning on the NYMEX oil trading floor in New York and London IPE in 2001 & 2000.