Spread Betting vs. CFDs

[danny]

What's the difference btwn spread betting and cfds?

[nadine]

Spread betting is commission-free, CFD trading is not.
Spread betting is exempt from Capital Gains Tax, CFD trading is not.
Dividends are paid, where relevant, out to CFD traders but not to spread betters.
CFD contract periods are flexible, Spread bets are based on a fixed ownership where costs are incurred if the trader wants to roll the bet over.

[danny]

Which is preferable?

[nadine]

Depends on what kind of role you want your broker to play. In spread betting the broker is just a bookmaker but in cfds trading he actually acts as your agent.

[danny]

I understand that cfds trading is more popular. I read that 40% of London Stock Exchange volume is cfd trading. I wonder why that is?

[nadine]

I think it's because they track the underlying price better than spread betting so the brokers prefer them.

[danny]

Thank you so much nadine. Still thinking about my next trading move.