Difference between spread betting and CFD trading?

[Investment Forum]

I dont get it, what is basically the big difference between the two? It seems to be the same, only difference I see is that they are named differently. So....where is the catch? Yeah I know spread betting is not taxed because its betting, but isnt CFD betting too?

 

[alfiemal]

Hi, I know what you mean there is not much difference, the main difference is the taxation. Some pros who trade CFD probably dont like to call themselves gamblers! But it would depend how long you are holding positions, trade size and overnight rollover charges do have an effect on the overall cost, the cost of both methods would have to be calculated for various timescales. Also some traders use level 2 and Direct Market Access with CFD's with tighter spreads than SB. If you are trading a market with tight spreads such as indices or fx and you are short term trading I personally would stick to SB there is no benefits that I know of with CFD.

 

[Igat]

I would suggest the biggest difference is CFD's have access to level 2 and essentially profit on future capital gains or losses on actual shares (brokerage). From what I can tell spread betting is essentially trading against the house which is really bookmaking (obviously they hedge their positions where necessary). Make of that what you wish but its clear to me which method ensures your "broker" stays honest.