Spread Betting vs CFDs: The Differences

This article aims to show the differences between spread betting and CFD trading. This information will help many traders identify which of the two markets they should be trading.

Spread Betting and CFD Trading

Spread betting and CFD trading are both speculative ways of trading the financial markets. They do not require the trader to own the underlying asset, and they are usually traded on a leveraged basis. They also share similar asset profiles; it is possible to trade stocks, indices and commodities either as spread bets or on the basis of CFD trading. Spread betting is especially popular in the UK, while CFD trading and trading with CFD brokers is popular in Singapore, Hong Kong, Germany, Netherlands as well as in many other countries. However, there are inherent differences in the two markets, and these differences are highlighted below.

The Differences Between Spread Betting and CFD Trading

Differences in spread betting and CFD trading exist in the following metrics:

  • Payable taxes
  • Location of brokers
  • Trading mechanics
  • Market access and trade execution methodology.

These will now be explained in tabular form.

Do I need to be located in the UK to enjoy spread betting?

A large percentage of those who engage in spread betting is based in the United Kingdom and Ireland. However, this does not mean that those who live in Europe or Asia cannot open spread betting accounts. There are two issues that those trading from outside the UK/Ireland have to contend with. These are:

  • a) The tax situations in the individual countries
  • b) Brexit

Tax laws in the UK and Europe are not uniform and many countries do not have tax laws that allow exemptions from any trading activity, be it spread betting or CFD trading. Another even more concerning factor will be the impact of the impending Brexit. It is uncertain if European traders who engage in spread betting and CFD trading will still enjoy the same benefits that are available to UK/Ireland-based traders post-Brexit. But for now, these are the main differences between spread betting and CFD trading.

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