All bets are on with recession gambling

Volatile markets have brought on a surge of tax-free spread betting, as Britons favour their odds with the bookie rather than sinking their money in vulnerable stocks.

Few industries are bearing up well in the current financial downturn and the looming prospect of recession has us looking for ways to tighten our belts.

The financial gaming industry, which deals in the very activity many commentators have blamed for the fall in share prices across the markets, is showing itself to be as resilient as ever to the new crisis. The fastest growing trend in financial circles is spread betting.

With no taxes, no paperwork, no stamp duty, and no commission, spread betting is booming in the present market turmoil. Allowing punters to bet on the rise, or significantly the fall, of currencies, markets, stocks, shares, options and commodities over a range of outcomes and along a defined timescale, spread betting is on the up.

David Jones, Chief Market Strategist at IG Group, said "from May 2007 in a typical month we opened 1,000 UK accounts: in September 2008 that number was nearer 3,000".

The intense media spotlight on the failing markets and the wider reporting of moves in currency markets in recent years has caught people's interest from all demographics.

Davin McAnaney, commercial manager of Paddy Power, says "the acceptability and ease of understanding it makes it an attractive proposition for all parties". Most popular are the wavering currencies and the Dow Jones and FTSE indices.

"Ultimately traders want volatility and those markets are particularly volatile at the moment," voiced Jones. Selling oil short (betting to fall), which has halved from $147 to $60 in the last three months, is another current trend punters are following.

The Northern Rock crisis also "brought in a lot of punters looking to short sell," says Jones, "until government ownership looked likely, and people lost interest."

While specialist spread betting firms such as IG and CMC Markets are seeing growing profits, competition is arriving. In the last ten years, the number of firms offering spread betting have grown from three to ten.

Conventional bookmakers are also moving into a market that is becoming a "mainstream financial product" according to Jones. Ladbrokes takes bets on market changes for a five-minute, hourly or daily basis, on currencies, commodities and indices.

The falling markets bring big losses and big returns for spread betters. Paddy Power took bets on the next bank to fall

The bookmaker Paddy Power hopes to rapidly expand financial spread betting, estimating by 2011 more than a million people in the UK and Ireland will be playing the markets in such a way.

Inevitably the falling markets bring big losses and big returns for spread betters. During mid-September Paddy Power was taking bets on the next bank to fall, top biddings were placed on Washington Mutual before all short bets on banks were suspended, as well as 29 services and stocks.

Washington Mutual collapsed on September 25. Spread betting is particularly vulnerable as your profits and losses depend on the extent to how right, or how wrong you bet. A single £1 per point bet can accumulate to hundreds in the current market state.

Measures, dependent on a customer's financial record, are in place to safe guard against excessive loss. But considering IG Group's 40 per cent rise in total dividend this year it looks as if the big spread betting firms, not the punters, are dancing on the sinking ship.