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FAQ Page 3 - Question 32

Q: I've noticed that the spread betting companies often quote a very wide bid-offer spread on the opening with non FTSE 100 stocks. Why is this?

A: For all but the biggest and most heavily traded stocks the London stockmarket often takes time to get going when it opens at 8am, sometimes up to an hour.

A spread betting firm's prices are often auto-quoted off the cash stock price.

• For example if Logica shares on SETS are trading at 310-311 the spread betting company's software would automatically quote of this price of course having added their spread to make the market perhaps 309-312
• As the cash price moves up and down the spread bet market moves automatically

At 8am the stockmarket opens and for many stocks and is characterised (on the opening) by wide bid-offer spreads for while the market settles down and waits for buy/sell orders to come in. Perhaps Logica closed last night at 310 but the first quote on SETS comes in at 300-320. With the autoquote function that the spread betting firms use you can now see why their prices are so wide.

The right tactic is if you see very wide spreads, wait 30-60 mins for things to settle down.