Spread-bet boss calls for new rules

THE CHAIRMAN of the City firm at the centre of a furore over a £6m 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 take the bet, and now expects to see rules governing the industry tightened so that they include public disclosure of the identity of major spread-betters.

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

To spread the risk of the bet, City Index entered a deal with stockbrokers Dresdner Kleinwort Wasserstein, which was forced to buy shares in Cyprotex to hedge its own exposure, a move which should have supported Davidson's bet.

The deal is now the subject of a series of internal investigations at the firms involved, and of a probe by City regulator the Financial Services Authority. It is expected to rule that the trade was irregular but not illegal.