A bigger risk in pursuit of a much bigger prize

FOR Peter Brown it’s a no-brainer. Gambling is for entertainment. Spread betting is how to make money. And with a punt just a click of a mouse away, the potential to make buckets of cash is out there, but you have to be careful.

Spread betting is a potentially lucrative and highly dangerous element of online gambling. The stakes are high and so are the risks — and it can now be pursued by anybody with broadband and an interest in financial markets.

No longer are stockbrokers the gamekeepers. No longer is the stock exchange the market to which buyer and sellers go in order to make money on shares. No old school tie required. Just tune in, turn on, and away you go, tracking the rise and fall of stock markets, and betting whether they are going north or south.

Spread betting took off in the last decade. Those who throw a wager on sports events know it involves betting not on the outcome, but the spread. For instance, a bookie will offer odds on the margin of victory and defeat in a match.

Spread betting on financial markets largely involves tracking whether market indices will rise or fall and by how much over a particular, usually short, time.

Brown talks a great game and there’s no reason to believe he doesn’t play one either.

His day job is chief lecturer at the Irish Institute of Financial Trading, which he co-founded two years ago. The institute trains people on how to make money spread betting on financial markets across the world. About 50 students a month take the institute’s eight-week course, after which, according to Brown, they are properly armed to go and multiply their holdings.

“We get a whole range of people who want to get into spread trading,” he says.

“We’ve had students, a garda, housewives, retirees, some foreign nationals who’re living here. The whole concept has grown hugely in popularity.”

On the face of it, spread betting seems straightforward.

“There’s only two horses in the race,” Brown says. “Up and down, but if we win we win 3/1 or 4/1 or sometimes even 7/1.” Of course, just as you can win big, you can lose a multiple of your stake.

Brown, with two decades of trading under his belt, including a stint as head of the treasury team in Barclay’s Bank, says the key is technical analysis. It involves analysing trends and deciding whether to place the bets accordingly.

“You have to be educated. You have to know what you’re doing.”

He reckons punters who follow the outline of his institute’s programme can earn 4% a month on trades. This corresponds to a return of nearly 50% annually on an investment, all tax free.

Brown notes that spread betting has acquired a reputation for being a bit dodgy, mainly because of the proliferation of offers on the net for punters to buy into the business. The losses can mount up. This reality informs the reason why spread betting companies are regulated by the Central Bank rather than the Department of Justice, which has responsibility for gambling.

The Central Bank recently suspended the trading licence of one of the country’s largest spread betting outfits, MarketSpreads. Once an audit was done, the suspension was lifted and clients were allowed to withdraw their money.

The scare that was the brief suspension highlighted once more the larger risks associated with spread betting. Traditionally, stockbrokers used to be the gatekeepers to risky investments like spread betting, but a greedy approach to fees and the advent of technology has seen that change dramatically.

The price has been bigger risks in pursuit of much bigger rewards.