It's easy for indexation companies to create spreads on share prices and indexes because they operate on a numerical scale which everyone understands. The result of the bet is unambiguous: it is based on the price reached by the share.
But there are some situations which people would like to bet on, but which do not represent results on a numerical scale.
Take, for instance, the London Stock Exchange's merger negotiations in 2000 with various other exchanges. There was lots of speculation about who the LSE would eventually end up with, and people wanted to bet on it. So indexation companies created an artificial point system to represent the possible outcomes.
Under this system whichever company was successful in merging with or taking over the LSE got 50 points. If there were two partners, they each got 25 points. Failed bidders got no points.
Having established the point system, the indexation company then offered its spreads on the bidders:
If you made a £20 bet on Nasdaq, and Nasdaq took over the LSE, you would collect 37 (50 - 13) x 20 = £740
If the Nasdaq and Deutsche Borse both took over the LSE, you'd collect 12 (25 - 13) x 20 = £240
If neither the Nasdaq or the Deutsche Borse took over the LSE, you would lose 50 (50 - 0) x 20 (your stake) = £1000
These are "performance spreads". They are simple numerical scales against which performances can be judged. The standard allocation for such scales is: 25 points for a win, 10 points for finishing second, and 5 points for finishing third. But these denominations can and do change.
They work as well in sports and general spread betting as they do in financial spread betting.
