Skip navigation
Interactive Investor home page [Logo]

Risk Warnings

Sports Betting

Introduction

Sports Spread Betting is a much riskier form of trading than share dealing or ordinary forms of betting, so you need to understand the differences, and all the risks involved, before you try it. First, there is a 'gearing' aspect which means the upfront payment you make is only a percentage of what you are ultimately liable for. So if things do not go your way, you will end up having to pay a lot more than your original stake. You also need to be aware that Sports Betting prices can be volatile, meaning it can be difficult to control the amount of potential losses.

You should not try Sports Spread Betting unless you completely understand what you are getting into, and what your potential losses are. This type of betting is not for everyone and you need to be prepared to lose all the money you are speculating with (and, remember, that could be substantially more than your upfront stake).

What it means for you

Before deciding whether to try Sports Spread Betting, you need to be aware of the following:

  1. These transactions are not suitable for a lot of people.

  2. Think carefully about whether Sports Betting is right for your financial circumstances and for the amount of money you have to invest with.

  3. The small deposit or margin you actually bet with means you are trading with a large amount of 'gearing' or 'leverage'. This means it only takes a small movement in the market to create a large loss (or profit) on your trade. This could include your entire deposit and a lot more losses on top (unless you place a guaranteed stop loss to limit your losses).

  4. The amount of capital you are prepared to risk should cover your credit limit and margin calls beyond that.

  5. You may need to deposit substantial additional margin, at short notice, to keep your trade in place. If you do not, or cannot, do this, your trade could be closed at a loss, which you will then be liable for.

  6. The Sports Betting structure and Sports Betting rules will be established solely by the company you deal with. For example, you will have to close your bet at your bookmaker's quotation, which when the underlying market is closed can be influenced by the weight of other clients buying or selling.

  7. It may be difficult or impossible to liquidate a position at times. This could happen during times of rapid price movement, and/or could be due to changes which mean that trading is restricted or suspended.

  8. You can use a stop loss and a guaranteed stop loss facility. The stop loss facility will trigger an order to close your current position. However, a simple stop loss will only execute when reasonably able to do so - so it could happen at a worse price than you had intended it to stop at. A guaranteed stop loss takes place even if the bet never actually trades at the price you specified. You pay a small premium for the guaranteed stop loss facility.

  9. Under Financial Services Authority (FSA) requirements your bookmaker is prohibited under FSA requirements from giving you investment advice.

  10. Client asset segregation may not give you complete protection.

Full Risk Warning

This notice is provided to you in compliance with requirements laid down by the FSA because you are proposing to undertake dealings in contracts for differences in the form of bets with a firm which is carrying on investment business as a bookmaker. It cannot disclose all of the risks and other significant aspects involved in dealing in contracts for differences in the form of bets. Engaging in this type of transaction can carry a high risk. As these transactions differ markedly from normal bets you should not engage in this form of betting unless you understand the nature of the transaction you are entering into and the true extent of your exposure to the risk of loss. The amount that you may win or lose will vary according to the extent of the fluctuations in the price of the sports-based index ('the underlying market') on which the bet is based instead of a predeterminable sum when a normal bet is placed. Always remember that previous betting performance is no indicator of future betting performance. For many members of the public, these transactions are not suitable; you should, therefore, consider carefully whether they are suitable for you in the light of your circumstances and financial resources. In considering whether to engage in this form of betting, you should be aware of the following:

  1. The high degree of 'gearing' or 'leverage' is a particular feature of this type of transaction. This stems from the margining system applicable to such bets which generally involves a comparatively modest deposit or margin in terms of the overall contract value, so that a relatively small movement in the underlying market can have a disproportionately dramatic effect on your bet. If the underlying market movement is in your favour, you may achieve a good profit, but an equally small adverse market movement can not only quickly result in the loss of your entire deposit, but may also expose you to a large additional loss unless you enter into a limited liability contract with the firm. If you deal on a credit basis and, therefore, not subject to initial margin requirements, the extent of your agreed credit facility does not limit your loss or financial liability and you can be subject to margin calls for an amount in excess of your facility. As a consequence the amount of capital you are prepared to place at risk should be sufficient to cover your credit limit and the possibility of subsequent margin calls which will only be made once your credit limit has been exceeded.

  2. You may be called upon to deposit a substantial additional margin, at short notice, to maintain your bet. If you do not provide such additional funds within the time required, your bet may be closed at a loss and you will be liable for the resulting deficit.

  3. Such transactions will not be undertaken on a recognised or designated investment exchange and, accordingly, they may expose you to greater risks than exchange transactions. The betting structure and betting rules will be established solely by the bookmaker. For example, if you wish to close the bet earlier than the time at which it would otherwise automatically expire, you will have to close it at your bookmaker's quotation which may reflect the premium or discount of the 'underlying market' which when closed can be influenced by the weight of the other client buying or selling with your bookmaker. You will have to close any bet with the same bookmaker with whom it was originally entered into.

  4. Where entering into such transactions, your bookmaker must do so under a two-way customer agreement pursuant to the Financial Services Authority Conduct of Business rules unless exempted from doing so. You should satisfy yourself that dealing is conducted throughout in strict conformity with that customer agreement and report to the FSA if you have reason to believe it is not.

  5. Prior to placing any bets, you should receive from your bookmaker written confirmation of all transaction or other charges for which you will be liable.

  6. As a result of Section 412 of the Financial Services and Markets Act 2000, the bets in this case are enforceable and the bookmaking firm may be sued by you (which is advantageous to you if you win) and may sue you (which is disadvantageous to you if you lose).

  7. Your bookmaker is prohibited under FSA requirements from providing you with investment advice relating to investments or possible transactions or possible investments or from making investment recommendations of any kind. This prohibition is subject to an exception where advice given amounts to the giving of factual market information in relation to a transaction about which you have enquired, as to transaction procedures, potential risks involved, and how those risks may be minimised.

  8. Your bookmaker is required to hold your money in segregated trust accounts in accordance with FSA regulations, but this may not afford complete protection.

  9. If you deposit collateral as security with your bookmaker, you should ascertain from your bookmaker how your collateral will be dealt with.

  10. If you have reason to believe that the bookmaker with which you deal is not acting in accordance with representations that it has made to you, the terms of your customer agreement or the rules of the Financial Services Authority, you should report it to: The Financial Services Authority Limited, 25 North Colonade, Canary Wharf, London E14 5HS. Telephone: 020 7676 1000.