Contracts for difference were popular in the hedge fund community throughout the 1990s, but they were unknown to retail investors until the late 1990s. Their growth among retail investors was greatly helped by the growth of online trading. Contracts for Difference, due to the fact that they are a bet on share prices need constantly updated prices and the growth of real time platforms was the start of this.
The sort of investor who wants real time information is also the sort of investor who would be attracted to the ability to easily and inexpensively short shares, trade on a margin and to avoid the stamp duty that particularly affects the frequent trader. In the early years of the twenty first century there was a gradual merger of the already established spread betting market with contracts for difference, as spread betting companies started to offer this instrument and muscle out the niche stock brokers who had recently dominated the market.
This had all been in the context of the UK market, and Contracts for Difference were unknown outside the UK. This changed in 2001 as the spread betting operators were looking at ways of expanding overseas. As the UK has a relatively lenient tax regime on betting then it was unlikely that spread betting could be replicated as a model abroad (and had in fact failed) and it was also likely to fall foul of stringent gambling regimes in places like the United States.
CFDs soon spread to Australia, Canada and continental Europe. Australia has also launched a limited range of CFDs on to its stock exchange, introducing transparency.
