Fixed Odds, Financial Markets - A Match Made in Heaven?

Financial market betting, which lends itself to spread betting, the unique betting system with high risks and high rewards, is getting a new twist thanks to Fixed Odds Group Ltd.

The aura of spread betting is suited perfectly for wagers on the financial markets. Many spread bettors make their living by placing wagers on where a certain stock or index will close by the end of the day or week. Odds can fluctuate during the course of trading, and bettors can adjust their wagers accordingly.

"If you buy a bet on the movement of the market you can win if the market goes up or if it goes down. It gives you that flexibility."

-Piers Allen

The complex system scares some bettors away from the system, but Fixed Odds has launched a new site that's aimed at creating a fixed odds-based system for those who like to bet on the financial markets.

The site, betonmarkets.co.uk, is the third site the company has launched in the last year, but it's the first aimed at the U.K. financial betting market and the first to offer fixed odds in that sector.

The U.K.-based site is up and running on a trial basis to familiarize customers with how the service will work and test their skills against the system.

Users can choose to bet on a wide array of financial issues. Spreads can be created if a player wants to bet on the direction on indexes, foreign exchange currencies and individual stocks.

The most basic bet is whether a certain market will close above or below a specified level.

Piers Allen, a director of the Fixed Odds Group Ltd. said the launching of the new site comes more than two years after the idea was conceived.

"We came up with the idea in 1999," he said. "We wanted to launch a site where you could get fixed odds on the movements of the financial markets. The only thing people have been able to buy in the U.K. on the financial betting front has been spread-based bets."

Allen offered an example of how the system works. If a person thinks the Dow will close at 10,100 within five days and decides he wants to win $500 if that happens, Allen explained, then he can input that bet information into the system and see what kind of odds he gets.

"The system will tell them if they want to buy that bet how much it will cost them, let's say $160," he said. "Then we give them the opportunity to buy the bet."

So how has Fixed Odds Group been able to bring fixed odds to a constantly changing and moving event like financial trading?

The key to the system, according to Allen, is the Black and Scholl's equations--the same equations that many financial advisors and analyst use in the United Kingdom to predict what the markets will do from a day-to-day, or even year-to-year, basis.

"The key is that it is taking some knowledge from the financial markets," Allen said. "We aren't in the business of speculating what the market will or will not do. We are trying to be as objective about this as possible, so we just take the market volatility and plug it into those equations."

The system is more complicated to maintain because of the constant update, but Allen said his company has been able to automate it and make it run just as smoothly, if not more smoothly, than a sports betting operation.

"Sports betting is different because you don't always have the same two teams playing against each other," he said. "With betting on the financial markets, though, we can take some equations and by knowing interest rates and the volatility of the underlying market we can then determine what the expected performance of the market is."

Allen said the company hopes to get 5,000 active users to the site within two years of operation, which he feels is a reachable goal for the company.

Financial betting is still a relatively small percentage of the sports betting industry, but Allen feels this is due mainly to the fact that most financial betting sites only offer spread betting or some other complex form of betting for the punters.

Allen said the system is simple to understand and that the ability to make money off the markets, even if an individual's portfolio doesn't do well, has the potential to make the new site a major player in the sports betting market.

"People tend to know a lot about the financial markets, but they can only invest in them," he said. "Investing in them is a very complicated procedure and is limited in its options. If you buy a bet on the movement of the market you can win if the market goes up or if it goes down. It gives you that flexibility."