As you know I spend quite a bit of time nosing around the financial markets. If you have never touched financial markets it’s worth having a look at some point.
Each morning I spend a lot of time browsing company reports and reading up on companies, industries and all manner of things. Today I was looking at IG index and the spread betting industry. IG are an interesting company and one I have held shares in twice. The report makes interesting reading.
IG is a spread betting company that started in 1974. It offered spread bets on gold back then but now it includes sports as well as financials. In comparison to Betfair it is booming, it’s also a lot more profitable.
IG’s earnings for 2008 were £97m vs. £20m for Betfair but it’s the growth that is the most interesting aspect. IG’s revenue is up 50% year on year compared to Betfair’s 25%. Most of the growth at IG has come from financial spread bets as opposed to sports betting. When I joined Betfair this is where I thought Betfair could completely clean up. I felt the exchange model they had could really make inroads to traditional financial spreadbetting. However Betfair never gained acceptance into the financial community and perhaps FSA accreditation may have helped there? It’s interesting to see how fast the financial spread betting market is growing. Dominance, it would appear, hasn’t turned out to be the case for Betfair and they recently hived off the financial markets to London Capital Group as a white label product.
This doesn’t appear to have worked either as volumes on Tradefair are very low and none of the really big financial traders I know use them, they prefer, despite their flaws, companies like IG. I think one of the problems is that city firms very often make a market in financials and as a market maker they are almost impossible to beat. No sooner have you submitted a bet than the market moves and your value is swept up before you even knew there was any there. That’s a killer. I guess this will always be a flaw of these types of markets, it’s an uneven playing field.
I left a good job in the consumer technology industry to go a trade on Betfair for a living way back in June 2000.
I've been here ever since pushing very boundaries of what's possible on betting exchanges and loved every minute of it.
