Spread Betting and the City of London

15 Spread betting and the City of London Claire Loussouarn In spring 2010 the spread betting company City Index launched an advertis- ing campaign targeting London commuters on the Waterloo and City line and encouraging them to ‘Trade whatever, wherever, whenever.’ Next to this tagline, the images to promote City Index’s first application (‘app’) for the iPhone sug- gest the user will benefit from the flexibility to place bets no matter what else he is doing at the time. In the centre of the picture, shown in Figure 15.1, a handheld iPhone displays a list of market assets and their prices or movement in graphs. In the background are three different scenarios shot from the perspective of an imagi- nary user: a pair of feet covered by white sand while a whale jumps in the sea; two ski ends and a lift handlebar riding up a slope; and a child wearing a blue helmet lying on the grass with his small bicycle upside down, looking straight at the user betting on his phone. Each background has a short description: ‘1.45 p.m. whale watching’, ’1.30 p.m. on the slope’, ‘12.30 p.m. bike ride with Henry’. Although the pictures are restricted to times spent outside the office, the message is clear: there are no limits to how, where and when trading in financial markets may be performed. A second message is implicit: trading with real-time prices via an electronic platform is no longer restricted to professional traders working for financial institutions; it is now within the reach of anyone with an internet connection via a computer, tablet or smartphone. At the time of the campaign, City Index was engaged in an ‘app race’ to enter the iPhone users’ market ahead of its competitors (Gibson 2011). The point was not, as many companies claimed, to be the first but to remain technologically attractive as the app version of a spread betting platform was becoming must- have paraphernalia of the online trader. By providing trading platform technology to the individual trader at home, spread betting companies entice private investors away from traditional stockbrokers and pension funds schemes into what they market as a new paradigm of trading, where ‘you are in control.’ Since the technology of electronic trading has been brought by the internet to the houses of private investors at the beginning of the millennium, spread betting has boomed. From two major companies at the end of the 1990s, there are now about a hun- dred registered names, according to the Financial Service Authority (FSA) reg- ister.1 Among these was one was briefly owned by a bookmaker, and some have been added to the list of investment products offered by certain British banks.2 234 Claire Loussouarn TRADE Whatever, Wherever, Whenever City Tradings the 1st Spread Betting and CFD Trading App for the iPhone'’ from City Index R on ttw 1.30pm On the slope [U A p p Store 0870 160 1153 Spread betting & CFD trading can result www.atytnoex.co.ulc/ipnoneapp_ . ... in losses that exceed your initial deposit CITVINDEX Figure 15.1 City Index advertisement campaign for its iPhone app, March 2010. Competition to squeeze the ‘golden goose of investment’ (Griffin 2011) is fierce and dominated by a few big firms, among which IG is well ahead, with 44 per cent of the UK market share (Investment Trends 2012).3 Since 2002, the company has reported regular and impressive growth. In May 2012, it registered a net trading profit of £366.8 million (IG Group 2012), up from £32.5 million 10 years ago (IG Group 2002). Started in 1974 as a bookmaking business IG provides a surprising success story for a betting product in the City of London. Historically, the City has worked hard to distance itself from betting and gambling which conventionally denotes excessive risk taking as opposed to the sober patriotism of investment. In that landscape, spread betting is a rather unexpected feature. How was this unlikely marriage arranged and developed to become an integral part of London’s financial services? In contrast to the way financial institutions and actors usually work hard to differentiate their engagement with risk from gambling (see Leins, Chapter 14 in this volume; Randalls, Chapter 12 in this volume; and Chumley and Wang, Chapter 13 in this volume), in the City Index ad, the principles of spread betting are brushed over as natural, self-evident and unproblematic: it is simply trading. Rather, the emphasis is placed on technological development and its potential as a tool of empowerment. Because spread betting profit imploded at a time when electronic dealing was changing the face of the city, its presence in the City of London often reads as a story of technological innovation made accessible to all via the democratic internet. Such a narrative, I argue, overlooks the fact that spread betting had existed for 35 years prior to this boom and also underplays the central role that regulation played in its development. In this chapter I describe how spread betting is a type of ‘gambling’ which has been shaped by the City of London and its regulatory environment. Contextualised by the common misconception ‘that new institutions or new technologies are born naked into the world; that they emerge into a legal vacuum, where they remain untouched by law until the legal system responds with regulation’ (Banner 1998: 2), this chapter instead argues that spread betting wasn’t simply spontaneously invented, but rather was the result of the productive interstices between financial and gambling regulations. Unlike exchanged-traded derivatives Spread betting and the City of London 235 TRADE Whatever, Wherever, Wheneve GOLD BUY 1401.4 SELL 1400.8 Don’t miss a thing with spread betting and CFD trading on your BlackBerry® smartphone Also available on other devices. www.cityindex.co.uk/tradewhatever or search Trade Whatever CITVINDEX Spread betting and CFD trading can result in losses that exceed your initial deposit. r m I h i ' »«*.»m» g i w w o o w « n a n y i w n p r e p T y « »wwmhumoham M*l IMCtlMmilOlMMMM MM iM* Ktrw ton Hm h i<» in Umn UnM OwMlm m ilW ta tir)* * MOO (MitMr* Figure 15.2 In February 2011, City Index launched a second advertisement campaign with the tagline ‘Trade Whatever, Wherever, Whenever’ with three different back- grounds depicting interactions with women while trading on a smartphone. (see MacKenzie 2007), spread betting was not intentionally designed to answer market needs; it flourished in a more opportune manner. As such it provides a revealing instance of how morality has shifted from Victorian times to encompass gambling as a productive activity. This is noticeable in the way that spread betting contrasts with the bucket shop, the Victorian stockbroker and antecedent of its business model which fell into disfavour. 236 Claire Loussouarn Before spread betting, bucket shops provided a new type of trading business: customers didn’t buy or sell shares but instead entered a betting contract against them that the price of a stock would go up or down. Facing growing concerns in Victorian times to redraw the line between gambling and speculation, bucket shops were condemned and slowly disappeared, as part of the process that legitimated the London Stock Exchange and their speculative practices (Itzkowitz 2002). My objective is not to reexamine why bucket shops disappeared or to wonder whether spread betting is the modern incarnation of its predecessor (De Goede 2005: 83). Rather I use the story of the bucket shop and its decline as a useful point of refer- ence from which to appreciate the legitimate place that the spread betting industry has come to occupy in Britain today and how the interaction between finance and gambling regulations is productive to manufacturing new kinds of risks. This chapter forms part of a wider ethnographic investigation of the spread betting industry in the United Kingdom. Much of the data used here is based on historical sources and oral history interviews with key individuals in the spread betting industry. It is also more widely informed by the larger set of data I have obtained by interviewing lawyers, spread betters, institutional traders, employees of spread betting companies, and gambling and financial regulators. My data was greatly enhanced by a month-long period of fieldwork in the offices of a spread betting company. This experience enabled me to compare the various ideas about spread betting that I had gathered during interviews, with its everyday practices. Bholat (n.d.) has demonstrated that thickly descriptive ethnography conducted under the contractually limited conditions of fieldwork offered to anthropologists by financial firms risks remystifying reality instead of illuminating it. Participant observation alone did not produce a sufficiently critical framework through which to study spread betting and related financial services in the City of London. In this chapter, I therefore adopt a historical approach to complement my contemporary data. Historical data help to create a critical tension between, on the one hand, the way that economic theory presents markets as functioning uniformly and natu- rally and, on the other, a past which has been purposefully forgotten because it reveals the social construction at work behind this powerful image. Using a historical approach allows me to ask anthropological questions about the work of finance now. In that respect, the anthropological ‘other’ and its heuristic function haven’t disappeared: ‘as digital technologies develop, the “other” is ourselves and the way we used to live in the past which we no longer remember’.4 In this chapter I excavate the bucket shop as the ‘other’ necessary to illuminate the significance of spread betting companies in the financial landscape of the City of London.

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