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(*High Risk Investing) CFDS Explained - Beginner's Guide To Contracts For Difference in Singapore

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Old 10-03-2015, 01:02 PM   #1
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(*High Risk Investing) CFDS Explained - Beginner's Guide To Contracts For Difference in Singapore

What are CFDs

CFDs or Contracts for Difference is an agreement between two parties to exchange, at the close of the contract, the difference between the opening price and closing price of the contract, multiplied by the number of underlying stocks specified in the contract. CFDs are traded in a similar way to ordinary stocks and used as an alternative instrument to stock trading. It allows the investors to:

-Gain exposure to stock price movements, without the need for ownership of the underlying stocks; and
-To take long or short positions, instead of paying the full contract value of the underlying position, the investor is only required to place a cash deposit (known as margin) as collateral.

CFDs do not have an expiry date. As long as the investor is able to top up variation margin and interest payment as required, the investor is able to hold the position indefinitely*.

An Introduction To CFDs - According to Investopedia

The difference between where a trade is entered and exited is the contract for difference (CFD). A CFD is a tradable instrument that mirrors the movements of the asset underlying it. It allows for profits or losses to be realized when the underlying asset moves in relation to the position taken, but the actual underlying asset is never owned. Essentially, it is a contract between the client and the broker. Trading CFDs has several major advantages, and these have increased the popularity of the instruments over the last several years.

Features & Benefits

1. Flexibility to Short
One of the main appeals of CFD trading is that you can short sell without owning the underlying stock. When you invest in a stock via a CFD on the CIMB Securities CFD Trading System, you can open a short position on the spot at the real-time tradable price by selling with the aim of profiting from the falling stock price.

2. Leverage
CFDs are traded on margin, using leverage to maximise your trading capital. This means for a small outlay you can open larger positions in the market compared to that of traditional stock trading.

3. No Expiry Date of Contracts
Gives you the freedom to roll over your open positions on a daily basis until you choose to close the position*.

4. Transparent Pricing
Our Direct Market Access system gives you the same transparent pricing and liquidity as stock trading.

5. Ease of Trading
There is more than one mode of trading CFDs - through broker or online. The online system for CFD trading includes features like good-for-the-day orders, real-time portfolio and daily account management.

6. Corporate Action
As an owner of an Equity CFD you will have your account adjusted to reflect cash dividends credited or debited on the underlying stock and to participate in stock splits, just as you would if you owned the physical stock. The only difference is that with a CFD you are not entitled to any voting rights.

What is Direct Market Access?

Direct Market Access (DMA), is the electronic facility that allows for CFD prices and liquidity to be identical to the underlying stock markets. Investors enter into CFDs at the underlying market price. This means that all orders are executed in real time and the investors can be assured of true market prices.

DMA also has the added benefit of offering the ability to participate in the pre-opening and pre-closing phase of the market, which is often the most liquid and volatile period of the trading day. CIMB Securities adopts the Direct Market Access model for Contracts for Difference as it offers one of the most transparent pricing structures to investors.

With the DMA CFD provider model, the investor experiences/ allows :

No additional spreads
Straight through processing
Potential to be a price taker or maker, and;
Participate in pre-opening and pre-closing phase.

In comparison, the Market Maker (MM) CFD model :

May not always have the same prices as the exchange
There is potential for additional spreads and potential requotes
Market makers are price takers only, generally there is no participation in pre-opening and pre-closing phase.

DMA vs. Market Maker Comparison#



Comparison of CFDs against Traditional Stock Trading

Illustration 1: Investor has a long position in XYZ stock and CFD price was up when the position was closed off.



Illustration 2: Investor has a long position in XYZ stock and CFD price was down when position is closed.



Please continue to read to find out the various CFD broker we have in Singapore
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Old 10-03-2015, 01:03 PM   #2
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CFD Margin

Q1. What is the initial margin?
Initial margin is the margin that you must furnish in order to transact in a CFD and is calculated as a percentage of the full contract value.
Initial margin varies with different CFDs thus you would have to check online for the initial margin on the CFD that you intend to place an order on.

Q2. What is Free Equity?
Free Equity is the surplus funds in the CFD account available for creating new buy and sell positions. You will be unable to initiate new positions if your Free Equity is negative.

Q3. What is Gross Liquidation Value (GLV)?
GLV is the value of the account if all the positions are sold at the current market price (excluding all the commission and charges).
GLV= Free Equity + Initial Margin

Q4. What is the daily mark-to-market pricing?
Mark-to-market is calculated based on the prevailing market prices of the underlying instrument. This means your initial margins required change in line with the markets movements.
Marked to Market (Initial Margin) = Quantity x Prevailing Market Price x Margin %

Q5. What is Margin Call?
A margin call occurs when you no longer have any free equity to cover the margin required to hold that position. You need to have funds in your account over and above that of the required margin to ensure you can cover any unrealised losses the position may incur.

Q6. How will I know I am subject to a margin call?
You will receive an email notification from CIMB Securities informing you of a margin call. You may refer to the Daily Activity Statement for the amount that you are required to top up.

Q7. Can I place an order without depositing the initial margin?
No. The system will reject the order if your account has insufficient funds to meet the initial margin requirement(s).

Q8. How long do I have before my margin call positions are force sold?
Once your position is under margin call, you are required to top-up the required margin within 2 business days, including the date of notice to fulfill the margin call.
A force-sell is triggered when the Gross Liquidation Value is less than 70% of the Initial Margin (i.e. Gross Liquidation Value divided by Initial Margin <70%). Once triggered, clients are required to top up the required margin by 2pm on the same business day.
CIMB Securities has the sole discretion to force-close the outstanding CFD contracts without further notice to you if you fail to top up the required margin by the stipulated timeline.

Q9. How do I top up my CFD account when I receive a margin call?
You can fulfill the margin call through the following methods:
a) Cash payment can be made over the counter at our office in Raffles Place.
b) EPS (Electronic Payment of Shares): Please choose 'lump sum' payment and initiate payments before 9pm to ensure that your CFD ledger is credited punctually before the next trading day. Kindly inform your trading representative that the EPS is meant for your CFD trading account. This applies if the EPS is made on the 1st day Margin Call Only.
c) Cheque should be crossed and made payable to 'CIMB Securities (Singapore) Pte Ltd'. Please state your trading account number, name and contact number on the back of the cheque, and indicate that this payment is meant for CFD. Liquidation of positions in CFD: Clients can choose to liquidate their CFD holdings to fulfill margin call.

Q10. What happens if I fail to top up by the stipulated timeline?
CIMB Securities has the sole discretion to force-close the outstanding CFD contracts without further notice to you if you fail to top up the required margin by the stipulated timeline.

Q: How do I calculate margin requirements?

Margin requirement is calculated as a percentage of the full value of your positions. Please make sure you are aware of the margin requirement applicable before you open each trade. Details of our markets can be found in the on-line “Market Information” icons on our trading platform.

Share CFDs

Margin Requirement for Share CFDs = (Quantity x Our Price) x Margin Factor.

For example, if you want to buy 5,000 UOB CFDs (Margin Factor = 10%) and Our Offer Price is 21.69

Margin Requirement = (5,000 x 21.69) x 10% = SGD 10,845.

Financing and Charges

Q: Why is there an overnight charge to hold my CFD position open when I have paid a commission?

You would normally only pay a financing charge if you hold a long position. This is because CFDs are a margined product. You only deposit a fraction of the overall value of the trade (typically 10%), allowing you to make a much larger potential investment than if you were buying the shares. So for example, $1,000 would be needed to buy a CFD representing $10,000 worth of shares. You are effectively 'borrowing' the $9000 difference, hence the financing charges.

However please note that depending on the benchmark rate in that particular country that your trade relates to, you might still be charged financing on your short Share CFD positions.

Q: Do I get charged commission for CFD buys and sells?

Yes. The opening and closing trade is effectively two separate trades, and therefore you are charged commission for Share CFDs on each trade.

Q: How is CFD overnight financing calculated?

For CFD markets with underlying instruments of Shares, Indices or other instruments (other than currencies), we will normally charge you a daily financing fee on long positions and we will pay you a daily financing fee on short positions. We calculate the daily financing fee as follows:
F = V I / b, where:
F = Daily Financing Fee
V = Value of equivalent holding of the underlying instrument
I = Applicable Financing Rate
b = Day basis for currency (365 for GBP, AUD and SGD, 360 for all other currencies)

There may be instances when a Daily Financing Fee is charged to you on Short Positions, rather than paid to you. This may occur in certain market conditions. We may vary the method of calculating the Daily Financing Fees and/or commission. We will notify you if this situation occurs.

The daily financing fee will be applied to your account each day that you hold an open position (including weekends).

Our standard financing rates is outlined in our Key Service Features.

Q: Do I get charged commission for CFD buys and sells?

Yes. The opening and closing trade is effectively two separate trades, and therefore you are charged commission for Share CFDs on each trade.

Q: Do I receive CFD dividends the same way as shares?

CFDs are subject to a dividend adjustment intended to replicate the net dividend payment applicable to the ordinary share. A dividend adjustment is credited to long positions and debited from short positions held at the close of business on the day the underlying goes ex-dividend.

http://www.phillipcfd.com/markets-pr...et-access-dma/

Access the market directly with DMA CFD

As the name suggests, Direct Market Access (DMA) CFD allows investors to have a direct access to the cash market via CFD. When a DMA order for buying long and shorting stocks is submitted to Phillip CFD, a corresponding stock order is sent to the exchange. When the order is filled on the actual exchange, the investor’s trading platform would be updated accordingly. In this model, the brokerage firm behaves like an ‘agent’ of the client. Phillip CFD provides DMA CFD on Singapore (SGX) and United States (AMEX, NYSE & NASDAQ)



Key difference between Shares CFD and DMA CFD:

•Phillip CFD will send the corresponding stock order to the exchange, and clients can see the order in the market depth
•Orders are done based on last done price, based on price/time priority (not bid/ask prices)
•Submit orders during the pre-opening, pre-closing and overnight periods
•Commission rates are lower on Shares CFD

Prices shown on the DMA CFD platform also mirror the cash market prices, which provides clients full transparency and the ability to trade at market prices with no additional spreads. Clients are able to improve the bid and ask prices by submitting orders at desired price and quantity. Their orders can also participate in the order book of the exchange and market liquidity, which makes DMA CFD trading transparent for clients. Once a DMA CFD order is submitted, the order would appear in the market depth of the particular counter. To begin trading in DMA CFD, simply opt in by logging in to POEMS > CFD > Forms > DMA Opt in form.

Do note that any limit order for Equities CFDs submitted at prevailing market bid/ask prices exceeding the following limit(s) might be rejected or delayed subject to our approval:

(DMA) CFD (whichever has a lower contract value)

•Maximum quantity per order: 500,000 shares
•Maximum contract value per order: S$500,000

It is therefore highly recommended for you to split large orders into multiple smaller ones for submission.


Direct Market Access



CFD providers generally use one of 2 business models: Direct Market Access (DMA) or Market Maker.

Our Direct Market Access model puts all client trades directly through to the stock market. This means that a CFD trade will affect the price and volume of the underlying share.

The price and volume quoted on the CFD platform will always be the same as that of the underlying market. Our clients are always assured of 100% transparency. We do not show synthetic prices or impose additional spreads, and will not take positions against clients.

With Direct Market Access, trading CFD is as good as trading the underlying in the stock market, and with the additional benefits of margin and shorting!

Cash vs CFD vs Margin

Numerical example

The use of leverage can magnify gains as well as losses. Comparing CFD, Margin and Stock Trading in the tables below, the returns a client can make on a profitable long trade using CFD (10 times leverage) and Margin (2.5 times leverage) are magnified because of the use of leverage. On the flip side, losses are magnified if it is a loss making trade.





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Old 10-03-2015, 01:04 PM   #3
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FAQ - CIMB CFDs | Trading CFDs | CFDS SINGAPORE

CIMB SECURITIES CFD

https://sgcfd.cimb.com/index.html

Benefits of CIMB CFDs

Direct Market Access (DMA)
CIMB Securities DMA CFDs give you the ability to participate in the order book of the underlying exchange. DMA also allows client to enter the pre and post market auctions, as well as to see the exact market execution.

Global Market Access
Access Global markets from our state of art trading platforms. With a focus on the ASEAN region we have one of the most diverse market offerings:
•Singapore •Hong Kong •Malaysia •Indonesia •Japan •Australia •USA

Leverage
Use the power of leverage trading to make the most of your winning trades. CIMB Securities offer up to 10x leverage on Single Stock CFDs.

Short Sell
Global markets can be uncertain at the best of times. CFDs allow you to Short Sell, giving you the ability to make money even when market falls.

Counter Party Risk
Even with the protection of market regulations dealing with the correct counterparty is essential for the protection of your money. CIMB Group is rated A3 by Moody’s and A- by S&P Senior Debt Credit Ratings.

Comprehensive Real-time Charting
Our charts are customisable and come with an extensive range of technical indicators and drawing tools to help you analyse price movements.

Advanced Order Management
Our platform allows for greater risk management and easier order placement. You can manage your risk more efficiently by placing various contingent orders for free.

Getting started – Using the platform

Searching for counters and creating watchlists



Under the quote panel, you can search for the counters that you are interested in and save the watchlist for future references.

Using a buy/sell order



A buy/sell order can be created by clicking right clicking a security and selecting “Create Buy Order” or “Create Sell Order”.

Viewing your orders



Under the order pad panel, you can view a summary of your orders. Choose to view All Orders, Filled, Pending/Open or Unfilled/Inactive orders.

OrdStat: Active or Inactive

LastAct: Last action performed on the order.
- Create: creating the order
- Cancel: deleting the order
- Amend: amending the order

ActStat: Status of the last action.
- OK: last action performed successfully
- Pending: still in progress
- Failed: last action had failed

DoneVolTod: Actual volume done

Is there a minimum funding amount for an account opening?
Clients are required to place a minimum initial fund deposit of SGD 2,000 in order to open a CFD account.

Are there any costs or administrative fees for opening and maintaining an account?
Whilst there are no fees or charges for opening or maintaining a CFD account, CIMB Securities will pass on fees for optional market data feeds and bank remittances charges.

Do you offer research materials?
Yes, CIMB Securities provides clients with extensive investing and trading ideas as well as comprehensive reviews for markets across Asia Pacific. Clients also benefit from regular equity strategy notes, which supply a longer-term view on investing in these markets.

Who is CIMB regulated by and are my funds protected?
CIMB Securities is a SGX trading member and is regulated by the Monetary Authority of Singapore. In accordance with Securities and Futures (Licensing and Conduct of Business) Regulations, funds deposited by customers are held by on trust by CIMB Securities for its customers in accounts segregated from CIMB Securities’ own monies




To open a CIMB CFD Account



You can either apply online or please download, print and fill in the forms below.

Method 1
Online application for cimb securities trading account = https://www.itradecimb.com.sg/eform/...Channel=MailIn
Online application for cimb bank starsaver account = https://secure.eforms.cimbbank.com.sg/StarSaver.html

Method 2
Forms to mail in for securities account only = https://www.itradecimb.com.sg/app/ar...thers/1CTA.pdf
or pm me for more informations


Please mail back with all supporting documents (copy of identity card and/or name card/staff pass/student card)

Maybank Kim Eng - FAQ | CFD Account Opening

KIM ENG CFD

https://www.kecfd.com/



KE CFD Trader is for advanced traders, providing sophisticated order types like stop loss and take profit. View important stock related data like dividend history, EPS and P/E.



To open a KE CFD Account
You can fill in the eforms below.
Maybank Kim Eng - Account Opening

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Old 10-03-2015, 01:05 PM   #4
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Open a CFD Account | CFDs | CFD Trading Singapore

PHILLIP CFD

http://www.phillipcfd.com/



As a member of PhillipCapital, Phillip CFD is proud to be the first stockbroker to introduce CFDs to Singapore. Since 2003, we have taken the initiative to bring in a wide suite of products to enhance our clients’ investment universe, one of which is the Singapore Straits Times Index CFD to allow clients to track and trade the underlying Singapore market. Phillip CFD also offers over 400 Singapore listed shares CFD, which is the most extensive in Singapore, and many other shares from Asia and USA. Phillip CFD also won the award of being *Singapore’s largest CFD provider by market share for 2010, 2011,2012 and 2013.

With a team of dedicated dealers, we continue to focus on product innovation and providing the best possible service. In addition, we are committed to provide fair dealing and a transparent trading experience to our clients through our platforms – POEMS and CFDTrader. Our Shares CFD prices are marked to market, with no additional spreads and clients can also trade via Direct Market Access (DMA), giving them another mode of CFD trading. Trade Equities CFD from as low as 10% margin requirements, and competitive commission rates and finance charges with Phillip CFD.

Find the right CFD Trading Platform to suit your needs

Trading CFDs is easy and convenient as we have different platforms to cater to different needs of our clients. Select POEMS (Phillip Online Electronic Mart System) for easy access via a website browser, or CFDTrader, a dedicated application-based platform designed for risk management or the brand new POEMS Mobile CFD, which allows you to trade CFDs anytime, anywhere. Whichever platform you require to suit your lifestyle, we are certain you would be able to find one that would suit your needs amongst the Phillip CFD offering.



UOBKH CFD

http://www.utrade.com.sg/page/site/p...SG_FAQCFD.html



Key Features
•Market Activity with Live Quotes
•Access your watchlists to monitor your favorite stocks
•Place orders effortlessly with smart search on the go
•Oversee your order book to manage your trades
•Quick access to your portfolio
•Monitor your Margin Requirements on the move

UTRADE CFD Edge
UTRADE CFD Edge allows you to take both long and short positions in the market such that you may take advantage of the volatility of stock prices. You will be able to maximize your returns with the leverage provided for this product.

UTRADE CFD Pro
Customize your own preferences on this platform to give you the cutting edge and advanced tools to assist you in making informed decisions. We have something for every client to cater to their different trading requirements; to beat the market whichever direction you choose.

UTRADE CFD Lite - Currently available on iPhone, iPad and Android
Want to be updated with the latest prices when you are in a meeting or on the go? With UTRADE CFD Lite, you can log on to your mobile device to monitor market movements and place your trades — anytime, anywhere. With mobile trading, you’ll never miss another trade again.



LIMTAN CFD

http://www.eq.com.sg/page/site/publi...s-overview.jsp



CFD is an agreement between you and Lim & Tan Securities Pte Ltd (LTS) to settle at the close of the contract, the difference between the opening and closing prices, multiplied by the number of underlying shares specified in the contract. In CFD dealing, you do not physically buy or hold the physical underlying shares.

There are risks associated with trading CFD. If you are not familiar with this product, please follow this link to find out more.

Why trade CFD with limtan.com.sg?
•The counterparty for CFD Trade is Lim & Tan Securities Pte Ltd (LTS).
•Clients' cash collaterals are held in trust accounts at a regulated bank in Singapore.
•Clients' share collaterals are held in sub-accounts with CDP, a wholly owned subsidiary of the SGX.
•LTS hedges its counterparty risk by buying shares directly in the ready market or borrowing shares from CDP under their Securities Borrowing and Lending programme. These shares are then held in custody with CDP.

Additional Benefits:
•Interest Free Days
•The interest-free period is T+3 market days.

Finance Charges
•6.5% p.a.for Long position
•4.0% p.a. for Short position
•Enjoy 50% off finance charges for the 1st 3 months for New Online CFD account5.

Transfer Fee
Special one-time waivers of transfer fees (for up to 5 counters) for shares transfer to LTS CFD account upon sign up.

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Old 10-03-2015, 01:06 PM   #5
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CFD Trading Account - IG.com

IG MARKET CFD
http://www.ig.com



What we do
We are the world's biggest CFD provider* and Singapore's most preferred FX provider.3
We give retail investors leveraged access to thousands of financial markets through our award-winning trading platform and mobile apps.

A global presence
•Offices in 16 countries across five continents
•Over 125,000 clients worldwide (May 2014)
•Average of 4,867,831 transactions globally per month (12 months to December 2014)
•FTSE 250 company with market capitalisation of £2.2 billion (May 2014)
•Licensed by the Monetary Authority of Singapore (MAS) and International Enterprise (IE) Singapore
•Net global trading revenue of £370.4 million (May 2014)
•Over 1000 staff around the world



Trading CFDs | Trade CFD Online | City Index Singapore

CITY INDEX CFD
http://www.cityindex.com.sg/



At City Index, we offer low commissions, tight spreads and low margins on thousands of financial markets, including indices, shares, currencies, commodities and more.

1With leverage, your losses are magnified in exactly the same way as your gains if the market moves against you and can result in losses exceeding your initial outlay. Please ensure you fully understand the risks involved.
Why choose City Index?

•Low 10% initial deposit on shares like Capitaland
•Commission-free trading on indices, forex, metals and more
•Tight spreads from 1 point on major indices† - including the Wall Street and Hong Kong 40
•24-hour access to prices on over 12,000 global markets
•Trade on the go with our apps for iPhone, mobile and BlackBerry devices
•Free training seminars and webinars crammed full of tips from our in-house traders
•Daily market news and analysis from our team of market experts
•Educational videos so you can develop your trading knowledge at your own pace



CMC MARKET CFD
www.cmcmarkets.com.sg/



Platform innovation
Our award winning trading platform is the culmination of over two decades worth of industry experience, innovation and technological investment. Next Generation is our most advanced platform yet, with fast execution and expert features and charts.

Expert trading
Our mission is to provide the ultimate trading experience for our clients by putting them at the heart of everything we do. We are passionate about online trading and are constantly leading the industry through innovation to improve the way our clients invest in financial markets.

Awards
In 2014, Singapore's CFD and FX recognised CMC Markets' platform with the Trading Platform Features award and highest rating for Charting in the Investment Trends 2014 Singapore CFD and FX Report.

In the Shares Awards 2014 we received the titles of Best Investor Education, Best Online Trading Platform and the overall prize for Financial Services Provider of the Year, for the second year running.

Client focus
We believe our dedication to understanding our clients and listening to what they need is what sets us apart from the competition. We examine all feedback that we receive from our clients and prioritise this in our platform and service development. If there is anything that you would like to see or think we could do differently, please get in touch using the feedback window inside the platform under the support tab. All feedback is sent directly to the Head of Product Development.



SAXO CFD
http://sg.saxomarkets.com/



WHY SAXO CAPITAL MARKETS

Saxo Capital Markets Pte Ltd is a licensed subsidiary of Saxo Bank A/S, an online trading and investment specialist, and also serves as its APAC headquarters. It holds a capital markets services licence under the Monetary Authority of Singapore (MAS); and a commodity broker licence issued by the International Enterprise (IE) Singapore.
A focus on the global financial markets

Saxo Capital Markets offers private investors online trading and investment in FX, Options, CFDs, Futures, ETFs, Stocks and Bonds.

As a fully licensed and regulated European bank, Saxo Bank A/S and its subsidiaries (collectively known as the Saxo Bank Group) support a global base of individual retail clients, corporations and financial institutions from its headquarters in Denmark and regional offices around the world.
A focus on technology

Technology at the core of Saxo Bank is what the bank is built around, from its origins in the early 1990s to this day. It remains central to our services and platform.

We continue to maintain a leading presence in online trading thanks to superior client service, competitive pricing and a focus on the development of industry-leading trading platforms.

Safeguarding client information and securely controlling, executing and managing real-time internal systems are of utmost importance to us. A large team of experienced IT professionals work to constantly enhance our innovative online trading systems and services, with particular focus on the security and stability of our trading platforms.

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Old 10-03-2015, 01:11 PM   #6
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popular doesnt mean they are good
just like when you buy stock, popular stocks doesnt mean they are good


unless it's this u buy a few months ago before the acquisition
talking about this

if lets say you use dma to buy popular, and u got the 0.32 offer right

if your popular is in cdp, you can accept the $0.32 by sending the acceptance form to boardroom,
if your popular is in cfd, u can only sell at the buyer

if popular got 95% acceptance of the offer, and get delisted
if your popular is in cdp, u do nothing, u also get back $0.32
if your popular is in cfd, u do nothing, u wont get back $0.32 and this position remains open and u pay the interest perpetually forever until it is re-list again.

Here's the thing, though - CFDs really do suck money from long-term investors, mostly through interest charges; they're an awful vehicle for long-term investing.

The retail CFD market originally took off in the UK. Now the thing about the UK is that (as you might've noticed) they charge 0.5% stamp duty on stock purchases by individuals, but that tax doesn't get charged to market-makers like banks (which is sensible, because otherwise you'd cripple the banks' market-making function).

CFDs were created to make it easier for short-term retail punters to make leveraged bets on UK shares. The retail investor gets all the exposure to the underlying shares, but because they're not buying the actual shares they don't get slugged for stamp duty. If they used a margin loan they'd pay the stamp duty, but if they use a CFD they don't.

So the problem comes up because of the nature of CFDs. They're the economic equivalent of borrowing a bunch of money and investing that money into stocks, and because of that you have to pay interest on the money that you've "borrowed". If you'd used a margin-lending facility to buy the same amount of stocks, you'd only pay interest on the amount you'd borrowed over and above your account balance.

And the interest rate on CFD loans tends to be fairly high! The CFD providers can't make much money on the spread they're charging you, or on the brokerage fees if they're a DMA shop, but they can rip your eyes out on the CFD interest because what are you going to do? CFDs aren't like stocks; if you want to go to a better broker you have to unwind your whole position.

So CFDs are wildly inappropriate for long-term investing (you'd be better off either buying the cash stocks, or using a margin loan if you really must leverage up) because of the extortionate interest rates, and they're pointless for short-term trading because there's no stamp duty in Singapore.

And if you're using CFDs as a vehicle for anything other than stocks, you're always better off using futures, because the implicit funding rate built into the futures is always going to be lower than the CFD funding rate.

(Also, trust me, just because a financial product is popular doesn't mean it's a good thing. Minibonds... Blumont... high-cost unit trusts... dual-currency deposits... ILPs...)
to add on, a good example is

cost to long singtel $4.24 for 10,000 shares

on normal contra
total contract value = $42,240
commission = $116

on cfd
total contract value = $42,240
total loan = $38,016 (90% of contract value)
commission = $63 (base on 0.15%)
loan breakeven based on 0.275% on the cash contract commission = $116-63 = $53
base on interest rate 3.5% = daily interest = $3.65
so loan breakeven = $53/3.65 = 14 days

so holding a cfd contract, for not more than 14 days, is the same as buying a cash contra settled on t+5

if one hold the cfd contract for more than 14 days, it will start to become very costly as your interest will keep climbing till u close the position

Last edited by Sinkie; 11-03-2015 at 06:41 PM..
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Old 10-03-2015, 01:21 PM   #7
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Shorting SGX share with SBL vs Shorting SGX shares with CFD

Hi Sinkie,

I would like to find out more abt securities borrowing for short selling.
If I short sell, then borrow shares, how much do I need to pay?
Do I put a deposit first or full amt is required?

I understand cfd only requires a certain %. What abt shares borrowing?
There are actually 2 methods to short overnight for sgx shares, 1) share borrowing lending account (SBL) 2) Contract for difference (CFD)

if wahkao3 wants to short 500,000 of biosensor, biosensor closed $0.67 yesterday

Method 1: SBL - share borrowing lending account
Step 1: open a SBL account with your broker
step 2: go to https://www1.cdp.sgx.com/scdcint/sbl/viewLendingPool.do to check the qty available for lending, in this case 2,622,000



Step 3: contact your broker to tell him the qty that you would like to borrow. at this point of time, u can choose to sell first, or wait for confirmation before u short from your cash account platform
Step 4: broker will contact his SBL department to double confirm the qty available for shorting, sgx-sbl only update once per day so only internal SBL department is able to see the live qty.
Step 5: if enough qty is available in SBL, SBL department will proceed to lend the 500,000 share of biosensor
Step 6: you have to deposit money into the SBL first before the shares can be lend and book into your SBL acct

Total Deposit + fee requires in SBL before the 500,000 share of biosensor is lend
1) Admin fee of $42.80/ counter.
2) Deposit of 50% (regardless bluechip or penny stock) of the closing price = 500,000 x 0.67 x 50% = $167,500
------
total : $167,542.80 + any commission charged by broker for selling
-------

Step 7: make an eps payment, and send a screenshot to your broker, then broker will proceed to borrow all 500,000 for you

You can borrow the shares for indefinately period as long there is no recall from cdp, you can borrow the shares for fun even if u have no intention to short it but a minimun of 3 days is required.

There is also a daily interest payment due, interest is based on everyday closing price.

Example : 500,000 x $0.7 (closing price) x 8%/365.

As long shares are borrowed regardless u short or no short, there will be an interest charged into your SBL le.

Method 2 : CFD - Contract for Difference

Step 1: Check from your cfd list to see whether u can short biosensor, the leverage ratio or the amount of free equity needed
Step 2: If yes and enough free equity, find biosensor then click [sell] to queue and short from your cfd platform.

Total Deposit + fee requires in CFD before you can short 500,000 share of biosensor is lend
1) $0 Admin fee
2) Deposit of 10% of the the price u want to short = 500,000 x 0.68 x 10% = $34,000
------
total : $34,000 + any commission charged by cfd for shorting
------

There is also a daily interest payment due, interest is based on everyday closing price.

Example : 500,000 x $0.7 (closing price) x 3.75%/365.

As long u closed your position, no interest will be charged anymore
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Last edited by Sinkie; 11-03-2015 at 12:10 PM..
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Old 10-03-2015, 01:21 PM   #8
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The Monetary Authority of Singapore requires all investors who wish to trade in unlisted Specified Investment Products, such as CFDs, to complete a Customer Knowledge Assessment form as part of the account opening process.

Investing in Unlisted Specified Investment Products - CFD

1) How will the financial institution assess if I have the relevant knowledge or experience to invest in unlisted SIPs?

The financial institution must conduct a CKA to find out whether you have the knowledge or experience to understand the features and risks of an unlisted SIP.

The financial institution will request information on your educational qualifications, investment experience, and work experience to assess whether you meet at least one of the following CKA criteria:

> You have the relevant educational qualifications.
> You have a professional finance-related qualification.
> You have a minimum of three consecutive years of relevant working experience in the past 10 years.
> You have made at least six transactions in unlisted SIPs in the last three years. Transactions include buying unlisted SIPs or topping up your investment in an unlisted SIP.

You can find out from the financial institution, the outcome of the CKA.

Even if you meet the CKA criteria, remember that you can always ask the financial institution for advice on whether an unlisted SIP is suitable for you. Refer to Q4 to find out how you can check if a financial institution is authorised to provide advice.
Is the CKA compulsory?

The financial institution must conduct a CKA for retail customers who wish to invest in an unlisted SIP. This includes situations where a customer sells part or the whole of his investment in an investment product to buy an unlisted SIP.

2) If I do not meet the CKA criteria, can I still invest in unlisted SIPs and open a CFD account?
Yes, you may still do so, but only with a financial institution that is authorised to provide advice. The financial institution must advise if the unlisted SIP is suitable for you, taking into account your investment objectives, financial situation, risk profile and particular needs, as well as the outcome of the CKA.

If your financial institution advises that the product is not suitable for you, you should carefully consider whether to proceed. If you still wish to proceed, make sure you fully understand and accept the implications of your decision. You will need to provide written confirmation to the financial institution that you intend to proceed with the transaction despite not meeting the CKA criteria. The financial institution must inform you in writing that you will be responsible for ensuring that the product is suitable for you.

As an additional safeguard, senior management approval is required before the representative can proceed with the transaction.
ABS and SAS had launched the e-learning module (CKA) for unlisted SIP with effect from 2 March 2015. Clients wihout prior trading experience in these products are now able to gain more understanding by going through the relevant modules. Clients who has passed the quiz at the end of the module will be able to print the certificate or show a screenshot of the certifcate in order to proceed to open a CFD account.

e-Learn | Learn from the Leaders






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Old 10-03-2015, 03:28 PM   #9
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how is this different from the SGX online CRA test ah?
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Old 10-03-2015, 03:32 PM   #10
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Q.: Does my broker hedge all client cfd positions as opposed to spread betting?

My impression was that CFDs were exchange traded and therefore that you were betting against "the market", whereas spread betting was essentially betting against the bookmaker who uses the markets as a reference. The point being that if you enter into a CFD, the broker is obligated to hedge that bet in the market, but this obligation doesn't exist in spread betting.

In practice, the aim of the CFD provider is normally to maintain a neutral position, profiting from the spread. Because of this when a CFD provider gets your trade he has one of two options -:

Matches it with another investor of theirs that placed a sell order for the same underlying asset.
Offset with another CFD company or by buying the actual underlying instrument.

However, there is no obligation on an FSA firm to hedge with its own brokers on a client position. This may lead to a greater capital base requirement especially in light of the new ICAAPs required as of 1 January 08. In other words, if your business plan/risk management policy articulated a policy not to hedge or rarely hedge, you might be called to take this into account when you have to calculate your capital requirement minimum. CFD providers using the direct market access business model do however promise to 'hedge' all client trades in the underlying market. This means that when you place a CFD trade, you should be able to see the corresponding trade being placed in the underlying market. This makes the CFD pricing and trading process more transparent for investors trading contracts for differences, although DMA trading then by its very nature limits the number and types of CFDs that can be traded (since for a transaction to take place it has to match an opposing trading on the exchange). Even though the order is placed in the underlying market, it doesn't mean that you own or are entitled to the underlying asset, and you are still subject to counterparty risks.

Market maker CFD providers may also hedge the CFDs they offer, but these arrangements are generally less transparent than for direct market access providers. Providers have different business plans. For instance, I had always heard that CMC rarely hedged any client positions. In fact, it is documented that in the past CMC Markets used to profile its customers and placed them into several different groups, including the 'A-book', the 'B-book' and the 'C-book'. According to a document previously used within CMC, the 'C-book' was a 'classification for clients with a past history of excessive losses on their account and the propensity to churn their Australian equity-only positions'. People with knowledge of CMC's Australian operations said CMC did not hedge the C-book... 'Hedging' is a fancy way of saying a company attempts to lay off its risk from individual trades. What CMC was doing was identifying a C-book risk that it wanted to take, because it was more likely that 'C-classed' investors would lose their money. This is classic bookmaker model, no? Other companies have a strict policy of always hedging and earn money off commissions. It is well worth noting that CMC Markets decided to 'transition' its hedging practices in June 30 2009 and now CMC has a target of hedging 90 per cent of its book, meaning it cannot profit from investor losses in the hedged portion and there is no longer any client profiling to determine the 10 per cent that is unhedged. [Source: Sydney Morning Herald]

Do you see the important point here? - The client side trade and the hedge are totally different contracts. A CFD provider doesn't have to hedge at all--it is the issuer of the security, not a broker and in particular market makers may not hedge all the CFD trades you place, and so may directly benefit if you lose on your trade. Sure, the provider had better have a large balance sheet since it would have to pay a huge gain out of pocket in this scenario.

The reason that spread betting gets tax free treatment (to private persons in the UK) is because HMRC/Inland Revenue historically views spreads as something where the pricing is set internally, by odds, and not market forces. This is a punt - I mean do you really know if it's 3:1 that the Daily Mirror will run a headline on Princess Diana tomorrow?

Compare: CFDs are pegged to actual equities and incorporate the life of an equity: for instance there are provisions in the provider's terms and conditions for passing on dividends to long position holders (and taking for shorts), even though you have zero legal connection to the company you are getting a CFD on.

To that I would note that most professionals don’t trade spread bets, only CFDs. Too much distortion and own pricing (versus market) in spreads. This is why firms started offering these Rolling Cash/Rolling Day sorts of products--CFDs wrapped up in a spread trade so as to get the market transparency of CFDs with tax free treatment of spreads. Rolling cash won't work for you with a nominee company as the client needs to be a biological person.



The chief executive of IG Markets, Tamas Szabo, said it was unlikely his business would be 100 per cent hedged, because some clients' trades would be set off against each other, creating what is known as a 'natural hedge'. He said his business profiled clients to the extent high net worth clients were identified, but he denied IG Markets deliberately set hedging policies to profit from customer losses. 'Quite frankly, it's unethical. No company should aim to see clients lose money to their [the company's] advantage,' he said.

Q.: As I understand that some CFD providers hedge their client positions on the stock market by shadowing client trades...

But don’t CFD providers have to pay stamp duty when buying the shares?

A: In the UK there is an exemption to stamp duty for a London Stock Exchange member who is buying to hedge a derivative transaction.

Elsewhere, it's generally included in the commission you pay.

In fact there are two exemptions, Market Maker Exemption and Broker Dealer Exemption.

Market Maker Exemption is for those brokers who are acting as a market maker in the securities. Broker Dealer Exemption is available when a broker firm is a member of the ISE or London Stock Exchange and where shares are acquired as principal.

Last edited by Sinkie; 18-03-2015 at 01:01 PM..
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Old 10-03-2015, 05:03 PM   #11
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So if pass this test, can open scb account?
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Old 10-03-2015, 05:21 PM   #12
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So if pass this test, can open scb account?
By right, you don't need to pass any test to open scb, this new test is mainly for cfd
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Old 10-03-2015, 05:24 PM   #13
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By right, you don't need to pass any test to open scb, this new test is mainly for cfd
Scb don't accept by right, insist on all these SIP thing... Wonder print the cert got use anot... haix...
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Old 10-03-2015, 07:31 PM   #14
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Old 10-03-2015, 08:15 PM   #15
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This one is created in response to the EUR/CHF issue? Hehe

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