Spreadbetting v. CFD

I was talking about smaller accounts and trading systems of a realtively more complex nature than simply taking a long or short market position. For example you buy or sell 430 CFDs at $30 costing $12,900, but I'm assuming you cannot bet $4.3 per point. You have to bet either $8 or $9, working out at £12,000 and $15,000 respectively.
Fair enough, you could do it with finspreads but don't know with others firms.

Good Trading
Here's my two-peneth. . .

As I understand it the most important difference between CFDs and spreadbets are that CFD spreads are taken from actual LSE quotes ie they should be the same as that quoted by your share broker.

The spreadbet companies can quote what they like when they like - this has been the subject of many discussions in this board under the general heading of ''bias''.

There used to be the added advantage of CFD's having a smaller spread but this has now all but disappeared.

Most important thing to bear in mind and be very clear about is that CFD's are a regulated form of leveraged investment and are therefore based on real time underlying share prices as are options and other derivatives.

Spreadbets are just that - bets. They are quoted by bookies who will always act to benefit themselves albeit in complicated ways that the regular punter either doesn't notice or understand.

Careful! Bookies also offer you CFDs - take a look at Deal4Free. They offer a fast and effective means of consistently loosing money.
I think that Fastnet's understanding of the differences is the closest to the truth (though I'm not sure I'd agree with his analysis of SB firms).

From what I can see the FSA's 'best execution' rules exclude spreadbets because they are 'in-house' products whereas other products are subject to 'best execution' rules because they are based on the real market. The 'in-house' definition seems to be the key. I think the other differences people have highlighted flow from this.

In practice CFDs and spreadbetting are the same (at least with Deal4Free). Spreads and prices are exactly the same.

Thanks to everyone who replied.


mmillar said:
In practice CFDs and spreadbetting are the same (at least with Deal4Free). Spreads and prices are exactly the same.

Today I watched some prices (various US Stocks, Nasdaq 100, and UK 100) on a D4F SB account on one PC, and a D4F CFD account on another. The prices and spreads are the same most of the time, but certainly not all of it for the US Stocks. There seems to be a tendancy for them to widen the spread more on the SB product than on the CFDs when things move quickly. This is not just a difference in time taken for quotes to hit the two PCs - pulling up 1 min charts on the two platforms show clear differences where the SB price moves much further in any given direction than the CFD one. Just an observation :)

Ultimately the smarter SB/CFD firms hedge their trades in the underlying instrument. The SB firms geared more towards the small retail market work on the " the mug punter is always wrong" theory, and accordingly probably only hedge a certain percentage of the punters bets. Now if this risk position to the firm arises from sb or CFD- really doesn't make any difference- it's still the same risk- BUT it probably costs the firm more to write a SB than a CFD due to gaming tax. Therefore the spread on an SB will normally be wider.
Also, all the momentum punters tend to jump in SB's so the "quoting firm" has a pretty good idea of which way Johny Mugboat Punter is going to be, ( as the previous nth punters have all ready dealt the same way, in the same stock) so.. they may not widen their spread, more likely they will shade it massively, knowing full well which way the punter is likely to be.
CFD@s however are traded by more sophisticated punters ( along with small hedge funds and some institutions) and tend to be more stable.

Hope this makes sense...
I must be going mad. I could have sworn I read a statement from D4F saying their prices and spreads were the same on the CFDs and spreadbets. However, when I look now I can only find this quote from D4F...

'So for example if a customer wanted to trade Vodafone as a CFD and also wanted to spread bet on Vodafone at the same time, the prices quoted for both products would be identical'

To me this says prices are the same but not necessarily spreads. Though Trader333 says he he has been told spreads are the same now as well.

If D4F are saying spreads are the same and they aren't then someone should make a complaint.

Congratulations Henry on actually doing some research. :) Perhaps you can post the shares you were looking at and the date and time so that we can all have a look.

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I was told by D4F whilst on the telephone that CFD and SB prices were the same and the only reason CFDs exist is for clients that live in countries, such as the US, where spreadbetting is not permitted.

To be honest my intended use of D4F would be as a safety mechanism. In the event that I was in a trade with IB that, for technical or other reasons, I could not close then I would take the opposite position with D4F until I could close both. It seemed an inexpensive option to me and I think that if I do go down this route I will opt for the CFD as opposed to SB option.

I agree with mmiller thanks to Henry for doing the research.


Perhaps you can post the shares you were looking at and the date and time so that we can all have a look.

Certainly. Here are 1 min charts of Apple from yesterdays US open. The first is the SB chart, which shows clearly the price dropping below 18.10 several times shortly after 14:30. The second chart is the CFD one, and as you can see in the same time period the price never drops this low. There is another more pronounced example at 15:09. You will also notice that just before 15:00 the CFD chart makes an extra low that the SB chart doesn't.

These may not be huge price differences, but differences they most certainly are. Needless to say, if you happened to have a stop at 18.05, they would be significant!

APPL SpreadBet 1 Min :

APPL CFD 1 Min :
Looking from your charts I would guess the problems are due to what CMC would describe as a "wrong price" (I used to suffer from these a lot on the FTSE rolling cash, but it has been better behavioured recently). Essentially a wrong price enters the system and although it appears on the graph it cannot be traded. For some reason it is appearing on the CFD chart but not the spreadbet. Remove this noise and are the charts identical - almost!

Would you also mind posting the 'offer' prices.


Was anyone stopped out by D4F yesterday on Apple below 18.10? If so you will have an excellent reason for complaint!!
fltbear said:
Have you asked CMC to explain themselves?

No, partly because CMC have never told me the prices are the same between products, but mainly because personally I'm not bothered, I don't use the SB account any more.

As for "wrong prices" - maybe, but this chart was one example of many many differences I watched all afternoon, so if this is the case they have a big problem with wrong prices! ( Or was that a euphemism for "taking out stops" ;) )

GNI Research provide an excellent illustration of the comparison between CFD's and SB in their Guide to CFD trading page 4. This can be accessed on

Hope this helps.

With CFD funds the deposit/margin is mixed with the companies account so if they become insolvent you are only treated as a creditor. With spreadbetting you are covered under the UK investors compensation scheme up to a limit, as with conventional sharedealing. So in practice spreadbetting it is less risky than CFDs if it were not for the spreads and bias.

I understand the betting tax which was originally paid by the punter is now levied on company profits, however they will wish to pass this on of course, hence it is still paid indirectly by the punter.

Except for this there is little to choose between a rolling spread bet like deal4free offer and a commission free CFD like idealing offer except the terminology. I am not sure if this is what defines the difference.

Of course trading and investing are games of chance under a different name, the only thing that matters is the quality of research and how you handle your money. Certainly the tax treatment of these products is a potential hornets nest especially if Mr IR tries to get two bites of the profits.

Most regulated CFD companies now use segragated client accounts
Hello There . Only Joined here today . Started trading this year . Switched to spread betting about 6 weeks ago to avoid commission , stamp duty and capital gains tax on the regular share dealing . After reading about half of the posts in this thread . Some providors are better than others . I'm relitively happy with my providor so far , they are a dedicated spread bet providor , don't do sports betting or regular share dealing . I've heard some scare stories about some providers . One of the things I don't like about one provider is the automatic stop losses they provide which can close you out at an unnecessary loss very quickly . I have to manually set stop losses , which I normally don't do .
I have one rolling bet running for nearly 6 weeks now and i'm going to leave it running until i'm well back into profit .
I look at the spread betting as a tool .