Spread bet firm calls for tighter rules

The chairman of the City firm at the centre of a furore over a £6 million share price bet by a millionaire businessman known as the Plumber is calling for a shake-up of the spread-betting industry.

City Index chairman Michael Spencer said he personally would have refused to have taken the bet, and now expects to see rules governing the industry tightened and to include public disclosure of the identity of major spreadbetters.

The deal, which raised eyebrows in the City, saw multimillionaire engineer Paul Davidson place a huge bet with City Index that shares in a small biotechnology group in which he was the major shareholder would rise. He appears to have been helped by the Cyprotex's broker Nigel Howe, known in City circles as the Spaniard.

To spread the risk of the bet City Index then entered a deal with stockbrokers Dresdner Kleinwort Wasserstein, which was forced to buy shares in Cyprotex to hedge its own exposure.

The deal is now the subject of a series of internal investigations at the firms involved and a probe by City regulator the Financial Services Authority.

It is expected to rule that the trade was irregular but not illegal.

City & Business