The impact of the UK Financial Service Authority's decision to suspend short-selling of key financial shares will likely have a limited effect on spread firm’s bottom lines, according to one of the industry's key players, but observers are united in their opinion that the new restrictions are placing the blame at the wrong door.

When draft proposals suggesting spread betting could be advertised on television were unveiled last year, it must have sounded like the promised land for the UK’s four principal sports spread firms.

While the cost of applying for licences and stricter legislation may be an unwelcome consequence for fixed odds bookmakers of the new Gambling Act, spread firms are already well aware of the increasing cost of compliance.

Upcoming changes to the EU’s MiFID directive, which provides the framework for regulating spread betting across Europe, will see increased capital adequacy requirements for operators and could accelerate the drive to consolidation across the sector. Nevertheless, participants in Ireland’s burgeoning spreads sector remain optimistic about their new pan-European future.

Financial spread betting has become a popular choice among investors for its “taxation free” status in the UK and Ireland. However, investors have to be aware that winnings generated by these operations may be taxable when they are resident in other jurisdictions.

Restrictions on opening spread betting accounts will become stricter with the introduction of the European Union’s MiFID regulation changes, which come into force today, industry bosses have warned.

The UK’s spread betting firms have played down the need for extra regulation despite last month’s betting prevalence study claiming that more than one in seven clients are problem gamblers.

While the broader UK gambling world was able to breathe a sigh of relief over the results in the prevalence study published yesterday, the spread betting industry, and fixed odds betting terminal’s (FOBT’s) were singled out for special mention, raising the possibility of additional study and scrutiny.

Dublin-based spread betting firm WorldSpreads Group plc has confirmed that its trading for the six months to the end of September has continued to accelerate, with European and Asian expansion offsetting the effects of a recently imposed ban on short-selling financial stocks.

If one sector of the financial world can be said to have enjoyed both the ups and downs of the past two years of market turmoil it has been the spread betting operators – until last Tuesday, that is.