Spread betting still hot

The buyout of London Capital Group has been funded through a straight term loan provided by a private individual. The funds raised were used to buy out the existing owner, who retains a minority stake in the business, and fund future expansion. Frank Chapman, MD of London Capital Group, said: “We financed [the buyout] privately, not through a bank. We considered everything and we were offered funding by venture capital and private equity players but we decided that it would probably be more interesting for us to keep all the equity because we believe the business we have got has very strong growth potential.”

Now formed, those private equity relationships will doubtless continue, should they be required for a future funding event. Quite what or when that would be looks unclear since much of London Capital Group’s projected growth is in its provision of white label spread betting packages throughout Continental European markets. This will be done by setting up strategic relationships with firms in the target markets and as such will not require either significant capital outlay or increases in London Capital Group’s personnel. However, given the high level of interest in this growing area of the market, highlighted by the recent quick flip of IG Group, private equity investors are likely to remain on hand if the business continues to perform to plan, should they be required.

Capital Spreads, the online spread betting business focused on financial instruments, is London Capital Group’s core and fastest growing business and it will also launch CapitalForex.com, a foreign exchange platform targeting the international online FX market. This launch has been financed from working capital.

The company expects to make a profit in excess of £2m EBITDA this financial year, which ends December 31 and currently employs 20 people.

How Capital Spreads works

Capital Spreads is not a stockbroker and does not charge commission or fees: it makes its profit from the spread it adds to the underlying market prices. Capital Spreads account customers can trade in many financial products using one of the three major currencies. Capital Spreads offers prices on UK, European and US shares, world indices, commodities, foreign exchange and bonds. Customers can bet on the Cash, Future or new Rolling Daily products.

It is the only company in the industry to offer newcomers to spread betting a dummy trading account which mirrors the live trading platform in every way, (other than the number of products available). The Demo Account provides potential customers with a virtual cash balance and allows them to execute mock trades absolutely free of charge. Other features available on both the Live and Demo site include a comprehensive order facility where customers can leave instructions to open new positions with “if done” stop and limit instructions plus, if required, an OCO (one-cancels-other) service.

Capital Spreads does not offer its customers credit accounts, enabling the company to offer market-beating spreads and prevent customers from getting into debt should the market turn against them. Every time a customer trades with Capital Spreads an automatic stop-loss is generated to ensure customers take responsibility for their risk.

Management team

Simon Denham, MD of Capital Spreads. During his career he has built up in-depth experience of multi-currency trading of Swaps, Swaptions, Bonds, IR derivatives, money markets and FX instruments. In addition he has established and run several derivatives trading operations including IT, risk management and pricing systems.

Rachel Woodford, marketing director. Previously she was a marketing manager for Cantor Index where she worked closely with Cantor’s senior management as the sole member of the marketing team for Cantor Index. During her four years at the company she launched Cantor Index, Cantor CFDs and Cantor Sport.

Frank Chapman, MD, London Capital Group Limited. Before London Capital Group, Frank was director at Cal Futures, London Investment Trust and Baring Securities and was subsequently a managing director at Deutsche Morgan Grenfell and Amerex Petroleum. He was principally involved in the futures, options and the swaps markets in both sales and trading.