Difference between Spread betting and CFDs

[small_bites]

I understand SB is being marketed as tax-free opposed to CFDs, but is that the only difference?

I'm a novice and looking to have a punt at day trading and want to understand the SB/CFD difference before looking for a suitable broker.

 

[tomorton]

That's pretty much it. There will be a small difference in spreads but probably not enough to dint your results.

 

[small_bites]

thank you tomorton

It seems a number of brokers don't mention spread betting as being part and parcel with their brokerage services. I've only come across a handful of SB affirmatives but so far user reviews have been extremely discouraging (at the moment a little warm with CMC). A bunch of the ones I've observed only offer CFDs. Does a CFD confirmed broker offer both SB and CFDs account options by default?... or is SB a unique addition with individual account privileges? If the latter, is there a list of "SB account" brokers I can check with options to further refine the search per requirement?

I was meaning to start a new thread titled "help with choosing a broker" but want to research a little more so I can ask all the right questions before disturbing the TW2 resident experts/experienced traders

 

[tomorton]

According to the European regulator, ESMA, SB is a type of CFD, so they are both subject to the same regulations on margin etc.. But in the UK SB and CFD are treated differently by the tax man. Firms can choose if they wish to provide both types of account but they are so similar it makes sense that they mostly do. It won't affect your SB experience as a client if the firm offers CFD accounts as well.

 

[10pips]

Not sure how much of this is true.
SB is tax-free, any large winnings, you wont be able to use this money to buy assets such as house etc.

 

[BigDeal]

SB is tax-free, any large winnings, you wont be able to use this money to buy assets such as house etc.

What do you mean? There are no restrictions if you've won the money fair and square, surely. If you rely on spreadbetting for your income, you almost certainly won't be able to borrow from any reputable lender I guess, but if you've won enough to buy something outright, then why not?

 

[Akwin]

CFDs and Spreads are both derivatives and can be made on margin - if necessary, margin requirements apply if necessary.

True, and the key difference between spread betting and CFD trading is how they are treated for taxation. Spread betting is free from capital gains tax (CGT) while CFD trading requires you to pay CGT*. Spread betting is also only available in the UK or Ireland, while CFDs are available globally.

 

[Akwin]

CFDs are short-term leveraged derivative contracts that track the value of some underlying instrument and pay off accordingly. Spread betting involves placing a speculative bet on the price movements of an underlying instrument without actually owning it.

 

[Henow1969]

As spread betting involves betting on the view of prices either going up or down, it cannot offer the ability to trade with banks or hedge funds and receive institutional-grade spreads. As CFDs involve trading the underlying market price via contracts, traders can access the ability to trade directly with banks and hedge funds to receive lower spreads and lightning-fast execution.

 

[tomorton]

As spread betting involves betting on the view of prices either going up or down, it cannot offer the ability to trade with banks or hedge funds and receive institutional-grade spreads. As CFDs involve trading the underlying market price via contracts, traders can access the ability to trade directly with banks and hedge funds to receive lower spreads and lightning-fast execution.

This is CFD-marketing guff from Admiral Markets.

How important has the impact of these things been on anybody's trading?

 

[ffsear]

This is CFD-marketing guff from Admiral Markets.

How important has the impact of these things been on anybody's trading?

Yep, literally a copy and paste job from admiral markets website. Not sure if these are bots trying to boost this sites SEO to sell more advertising. I don't know what's going on but this site is becoming more and more unreadable by the day.

Its a shame, so many good posters have disappeared