Difference between Spread Betting & CFD Trading

Along with various similarities between financial spread betting and Contract for Difference Trading, there are dissimilarities as well. Let us answer our first question. What is spread betting? Spread betting is any of the many types of wagering on the result of a particular event with many outcomes. In Spread Betting, spread is the range of the outcomes of the event. In this, the bet is based on whether the outcome will be above or below a particular spread. In case of spread betting the money is on points and not shares. First let us look at the similarities:

1. In both the cases i.e. spread betting and CFDs, stamp duty is not required. Both ways of investment are free from stamp duty. The reason is simple, both of them do not require buying and selling of the actual assets and this is the reason why they do not require stamp duty.
2. In both the cases, the trader does not buy the shares he has been trading for. As the trader is not buying any assets, he does not hold any voting rights. This is because here the trading is on the price of the asset.
3. Another point of similarity is that in both the cases, the trader can earn in a situation when market is falling as well. There is only one situation in case of CFD trading when an investor can not earn profit and that is when the market is rising. Apart from that, things can be bright for the investor.

Above mentioned similarities can make a picture in front of readers that both of them are same and there can be no differences. However there are points of distinction as well. Some of them are as below:

1. In case of spread betting, the trader enjoys commission free betting. There is no commission here. However, CFD trading is not commission free. The CFD investor needs to pay commission to the CFD broker or the company.
2. One thing which is available for CFD traders only is the dividend. Investors in spread betting do not get the advantage if dividend.
3. Capital earnings in case of spread betting are exempt from tax however in case of CFD trading; investors need to pay tax on their earnings.

CFD Trading is currently available in United Kingdom, Netherlands, Germany, Switzerland, Italy, Singapore, South Africa, Australia, Canada, New Zealand, Sweden, France, Ireland, Japan and Spain. Hong Kong has plans to start this trade as well. Spread betting is more popular in United Kingdom only. A new investor should have thorough knowledge of the trade no matter which trade it is. It can be spread betting or contract for difference trading. It is always better to learn and then take risk rather then taking risk and then learning the trade. Going by the old saying “Prevention is better than cure” our suggestion to all is to study the market before investing your hard earned money.

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