In 1982 the London International Financial Futures Exchange opened for trading. In a fairly short time futures and options became hugely popular as financial instruments, and by early 1997 Liffe was the largest derivatives exchange in Europe.
It was a market shared by large member firms and smaller individual liquidity providers, or locals.
However, unnoticed and beyond the glamour of regulated exchanges and open outcry trading, another revolution was starting.
Bookmakers began to offer ‘bets’ on financial instruments and commodities. In fact, the first real financial bet had been developed by Stuart Wheeler as long ago as 1974.
Unlike the large derivatives exchanges, these bookmakers began to make the financial markets truly accessible to small retail investors. In the early 1990s UBS Warburg adopted an instrument very similar to an equity swap called a contract for difference (CFD).
Another way of describing the instrument is like...