In February last year, I asked David Jones of IG Group how spread betting works from a provider’s point of view. Here’s what he told me:
“......as a spread betting company we want, ideally, half of the clients are positive, half are negative; in reality it never works that way, there's always going to be a shift, so companies like us, let's say all of our clients are buying, then companies like us, like IG, will be active in the underlying market, whether it's shares or currencies or futures, hedging our risk, so to make sure that, if the customer is making money, they're not making the money off us at our expense.
“So again, a popular misconception is that companies like us are only happy if clients lose, and this could not be further from the truth, because we hedge our risk away, we want clients to stay profitable year in, year out, and keep trading, and then we keep making our little bit of spread every time they trade.”
You can listen again to my interview with David Jones here: