What is spread betting and how does it work: A complete guide for brokers

An introduction to spread betting

Offering diverse trading models catering to a broader range of trader styles can represent a significant revenue opportunity for brokerage firms. Among these, spread betting has gained considerable attention, especially in regions like the UK and Ireland, where its unique mechanics and regulatory environment have fostered a vibrant trading community. 

Spread betting is a seemingly straightforward idea with sophisticated implications for product design, compliance, and revenue. At its simplest, it enables clients to speculate on the price movements of various assets - including stocks, indices, currencies, and commodities. The fundamental concept revolves around predicting whether an asset's price will rise or fall, with profits and losses determined by the accuracy of these predictions and the magnitude of price movements. Crucially, there is no ownership of the underlying instrument; the exposure is synthetic and cash-settled.

Understanding the mechanics, regulatory requirements, and implementation strategies of spread betting is essential for brokers considering this expanding market segment. Brokerage firms can implement the model alongside other leveraged products (e.g., CFDs) and integrate it into a multi-product stack to attract active clients, efficiently hedge books, and expand regional offerings where permitted. By offering spread betting, brokers can tap into this lucrative, growing segment while providing clients with versatile trading opportunities.

The feasibility questions then become about technology and governance. 

Can the stack deliver transparent pricing, risk controls, clean audit trails, and jurisdiction-aware onboarding, without duplicating infrastructure? cTrader addresses this by offering spread betting as a native, built-in feature available as a low-cost add-on. It reuses the same market data and liquidity as CFDs across desktop, web, iOS, and Android, while supporting limited-risk accounts and GSLOs.

Talk to our Sales team to learn how cTrader supports a full range of trading models - including spread-based setups - within a modern, compliant, multi-asset ecosystem.

Understanding the concept of spread betting

At its core, spread betting involves predicting the direction of a market's price movement over a specified period. When a trader places a spread bet, they essentially enter into a contract with the broker, offering a specific amount per point of price movement in their chosen direction. The building blocks that define spread betting include the spread, the stake, and pip movement.

Key terms explained

• Spread: The difference between buy and sell prices. It represents the broker's transaction cost and profit margin.
• Stake: The amount of money the trader risks per point movement of the market price.
• Buy (go long) vs Sell (go short): The directional choice: A 'buy' position profits if the market rises; a 'sell' position profits if the market falls.
• Point/pip movement: The Smallest price change in pip units, which quantifies the market's movement.

How profits and losses are calculated

Profit or loss = Stake × Price Change in Pips

For example, if a trader bets £10 per pip on the FTSE 100, and the index increases by 50 pips, the profit is £500 (50 pips × £10). Conversely, if the index drops by 50 pips, the loss is £500.

Traders do not own the underlying index or asset. Spread betting offers significant leverage, allowing traders to control large positions with relatively small initial deposits. Traders should always be aware that leverage amplifies both gains and losses. UK consumer bodies and ombuds services describe spread betting and CFDs as high-risk instruments that require careful onboarding and communication, making clear explanations essential to set expectations correctly. 

The key advantages of spread betting include flexibility in position sizing, leveraged exposure to markets, and potential tax efficiency, which varies by jurisdiction. In some markets (e.g., UK/Ireland for many individuals), spread-bet profits are typically exempt from capital gains tax and stamp duty. Tax outcomes depend on personal circumstances and may change, so it is advisable to seek independent advice. These benefits have contributed to its popularity among both retail and institutional traders.

How spread betting works in practice

Let’s illustrate with a step-by-step example involving the EUR/USD forex pair:

• The broker quotes EUR/USD with a spread of 1.2000 (buy) to 1.2002 (sell).
• A trader believes EUR/USD will rise and chooses to buy (go long) with a stake of $5 per pip.
• The market moves from 1.2002 to 1.2012, a 10 pip increase.

Calculation: Stake × Pip Movement = Profit ($5 × 10 = $50)

Margin and leverage

• Margin requirements depend on broker policies but typically involve placing a percentage of the total position size as collateral.
• Leverage amplifies exposure, meaning a small margin can control a larger position, inflating both potential gains and losses.

Execution quality remains a live differentiator across platforms. Pricing engines, liquidity links and platform-level order protections shape slippage, fills and client trust. cTrader implements spread betting as a built-in feature or a low-cost add-on, utilising the same market data and liquidity that power CFD accounts, ensuring symbol catalogues, routing, and reporting are aligned.

Spread betting vs. CFD trading

Both products provide leveraged, cash-settled exposure without ownership of the underlying instrument. The differences that matter for product, tax and compliance teams are practical rather than philosophical.

Neither Spread Betting nor CFD trading confers ownership of the underlying instrument.

Ticketing and sizing  

• Spread bets are sized in stake per point/pip (for example, £/point)
• CFDs are sized in units/volume (lots or contracts). 

Entry friction is often lower for stake-based tickets because clients reason in currency per move rather than abstract units, making the concepts easier to grasp. 

Tax posture in the UK for individuals

• Spread betting: HMRC’s guidance states that financial spread bets do not give rise to chargeable gains or allowable losses and are not subject to stamp duty.
• CFDs: CFD profits for individuals may be subject to capital gains tax, while CFDs generally do not attract stamp duty. Firms should treat tax content as educational only and prompt clients to seek independent advice. 

Regulatory treatment 

UK FCA governs providers of CFDs, spread bets, and rolling spot FX to retail clients under similar consumer-protection standards (e.g., appropriateness tests, leverage/margin close-out, negative balance protections as applicable).

Quick comparison chart

Operationally, brokers can offer both, tailoring products to regional regulatory frameworks and client preferences. cTrader’s architecture allows the coexistence of account types — CFD and spread betting — on shared data, liquidity, and risk tooling, simplifying symbol management, reporting, and surveillance.

Regulatory and regional considerations

United Kingdom. FCA rules confirm limits on leverage (typically 30:1 to 2:1 by asset class), 50% account-level margin close-out, negative balance protection for retail clients, and a ban on monetary and certain non-monetary inducements to trade. Firms must conduct appropriateness assessments, maintain clear and prominent risk warnings, disclose costs, and maintain transparent order and communication records. Product, marketing, and customer support teams should work from the same rulebook so that suitability and disclosures are consistent at every touchpoint.

Ireland. The Central Bank of Ireland’s national CFD measure continues ESMA’s protections for retail clients in or from Ireland, codifying leverage caps, margin close-out, negative balance protection and incentive restrictions. Irish supervision also puts weight on appropriateness testing and transparent risk disclosures. 

European Union (outside Ireland). Spread betting product availability and marketing permissions vary by country. Local legal advice is essential for scoping the go-to-market strategy, tailoring risk warnings, and leveraging default terms.

United States. Financial spread betting is not offered to US residents. Even where “event contracts” and prediction markets are debated in separate regulatory contexts, retail spread betting on financial markets remains off-limits, so brokers should enforce residency and eligibility rules strictly.

Compliance implications for brokers

• Onboarding & appropriateness: Test knowledge/experience and affordability for complex instruments.
• Retail protections: Leverage caps, margin close-out, negative balance protection, and marketing restrictions (local rules apply).
• Disclosures & reporting: Clear risk warnings, order/trade records, and periodic statements consistent with local conduct rules.
• Tax disclaimers: Where relevant (e.g., UK/IE), flag that tax depends on individual circumstances and may change. Most sources agree that spread-bet gains are generally outside CGT for individuals in these markets, but exceptions can apply.

Platform enablement

A modern stack should unify account types, audit trails and risk controls. Platforms like cTrader facilitate compliance by integrating risk controls and client verification tools, seamlessly supporting legal operations across different jurisdictions. Processed against the same market data and liquidity, and supported across desktop, web, iOS and Android. Back-office and API layers (Manager/Reporting, Open API, FIX) connect trading to compliance and BI so that surveillance, reconciliation and regulatory reporting happen on time with minimal manual lift.

Advantages and risks of spread betting

Advantages

• Leverage enables significant market exposure with minimal initial capital.
• Access to  a wide range of markets through a single account (indices, FX, commodities, equities)
• No stamp duty or CGT for individuals in certain jurisdictions, reducing transaction costs.
• Opportunity to benefit from both rising and falling markets.
• No custody of underlying; straightforward ticketing via stake-per-point.

Risks

• Leverage amplifies losses, potentially exceeding initial stakes. Rapid moves
• Volatile markets may trigger stop-outs. Rapid moves can lead to substantial losses.
• Overnight news can gap markets. 
• These are complex instruments that have a steep learning curve. 

For brokers, the responsibilities are straightforward to articulate and exacting to deliver: price transparently; disclose all costs, including financing and GSLO premiums; operationalise leverage tiers, account-level margin close-out and negative balance protection for retail clients; keep complete trade and communications records; and offer education that informs without incentivising trading in ways that breach inducement rules.

How brokers can offer spread betting with cTrader

cTrader supports the infrastructure needed to implement spread betting confidently. Within its modern, multi-asset ecosystem, spread betting is delivered as a built-in account type or as a competitively priced add-on. This allows brokers to enable it alongside existing CFD accounts without re-architecting data, liquidity, or risk workflows.

Complete back-office control in cTrader Admin

Unified back office (statements and GSLO premiums) with account-type flags. Configure spread-betting accounts, instruments, and risk profiles directly in the admin panel for consistent governance and faster ops.

Protection profiles

Define price-slippage tolerance and related safeguards to align execution behaviour with internal risk policies. Limited-risk accounts and GSLOs can be enabled so that maximum loss per position is defined up-front for an additional premium. This approach complies with ESMA/FCA frameworks, providing clients with transparent protection that operates effectively even in gap scenarios. However, actual protection execution depends on market liquidity, broker setup, and prevailing conditions, so no guarantee can be provided beyond these operational limits.

Volume profiles

Set stake-per-pip parameters, including min/max ranges and step values, to match local norms and suitability frameworks. One symbol catalogue and risk engine; stake-per-point tickets convert to equivalent notionals for pricing, margin, and P&L.

Trader-ready experience

Spread betting runs out of the box across all cTrader apps, including mobile, web, Windows, and Mac, with unified pricing, routing, and reporting.

Native features

Spread betting in cTrader is a native, built-in feature offered as a low-cost add-on to the core package, available alongside Forex and CFD hedging accounts. Orders use the same market data and liquidity as CFDs, ensuring consistent execution and simplified management across account types. This architecture helps standardise pricing, margining, and reporting flows while reducing operational overhead.

APIs that connect the front office to governance

Reporting and Manager APIs, Open API and FIX endpoints allow firms to stitch trading to CRMs, surveillance tools, data warehouses and BI dashboards. This facilitates appropriateness checks, communications archiving, trade reconstruction, and regulator-ready reporting, making them easier to automate and audit. The documentation also exposes spread-betting fields, such as a stake parameter and a spread-betting flag, so that internal systems can distinguish account types without custom workarounds. 

Integrations that build confidence

Beyond analytics, cTrader connects with over 100 third-party integrations across the broker stack, including liquidity providers/bridges, CRMs and client portals, KYC/AML & compliance, risk & surveillance, payments & funding, and reporting/BI.This enables a fully unified ecosystem that brokers can rely on to maintain consistent execution and oversight across channels, allowing them to operate with fewer hand-offs between systems.

Conclusion

Spread betting unlocks a dynamic trading avenue for brokers, offering flexibility, leverage and diverse market access. However, to harness its full potential, they must prioritise transparency, risk management and compliance.

With cTrader’s advanced trading ecosystem, brokers can confidently implement and scale spread betting solutions that comply with local regulations while delivering a modern, seamless user experience.

cTrader offers a native, built-in spread-betting feature, available as a low-cost add-on within its broader multi-asset ecosystem, complete with limited-risk support, GSLOs, and APIs for reporting and supervision. It’s a platform engineered to let you adapt to local rules and ship a consistent client experience. cTrader makes it easier to expand responsibly, communicate clearly and scale responsibly.

Talk to our Sales team to learn how cTrader can help you implement a spread-based trading model with confidence.

FAQ

1. What is the difference between spread betting and CFDs?

Both are leveraged and don’t involve owning the underlying asset. Spread bets use a stake per point, CFDs use units/volume. Spread betting is generally tax-free in the UK/Ireland and attracts no stamp duty for many individuals, while CFDs may incur CGT. Rules vary by person and can change.

2. Is spread betting legal in my country?

Spreadbetting is available and regulated in the UK and Ireland. It is not available to US residents due to legal and regulatory limitations, and varies elsewhere in the EU.

3. How do brokers make money from spread betting?

Brokers make money through the spread (the difference between buy and sell prices). Secondarily, overnight financing and specific commissions or fees for holding positions.

4. What are the main risks for traders?

Leverage can amplify losses, and volatile markets can lead to rapid, sizeable movements and losses. Market gaps can exceed standard stops. Proper education and risk controls are essential. 

5. How does leverage affect spread-bet outcomes?

Leverage magnifies both potential gains and potential losses, making effective risk management critical. Traders should understand margin requirements, use stops (including guaranteed where offered), and size stakes prudently.