Recommendation for CFD trading

[wahkao3]

eh u noob then stfu la

do u even know what is DMA? DMA IS NOT A PRODUCT LA

there is not such thing as direct CFD u noob

DMA stands for direct market access...zzzzzzzzzzzz

CFD got 2 types

taken from wiki

CFD providers

CFDs are typically traded over-the-counter with a broker or market maker, known as a CFD provider. The CFD provider will define the contract terms, the margin rates and what underlying instruments it is willing to trade. They trade under two different models, which can have an impact on the price of the instrument traded:

Market maker (MM): this is the most common method, and is where the CFD provider makes the price for the CFD on underlying and takes all orders onto its own book. Most CFD providers will hedge these positions based on their own risk model, which may be as simple as buying or selling the underlying, but may also be via portfolio hedges or by consolidating client positions and offsetting one client long with another client short position. This does not affect the CFD trade as no matter what the CFD provider does with its own market risk, the contract is always between the trader and the CFD provider. The main impact is that price can be different from the underlying physical market as the CFD provider can for example take into account other client positions it is holding. This does allow the CFD provider to be very flexible in the products and trading times it offers as it allows them to easily create hybrids and hedge using alternative instruments for example to allow trading out of normal market hours. In practice, the market maker price usually matches the underlying instrument as the CFD provider would otherwise be exposed to arbitrageurs, but some CFD providers add an additional written guarantee in the contract that all CFD prices will match that of the underlying instrument.

Direct market access (DMA) was created in response to concerns that the price in the market-maker model may not match that of the underlying instrument. A DMA CFD provider guarantees that it will do a physical trade on the underlying market to match each CFD trade on a one-for-one basis. The contract is still between the traders and the CFD provider but through this method it is guaranteed that the CFD price is the same as the underlying price and that they will not be re-quoted. They will also be able to see their order in the underlying physical market order book. DMA only works where the underlying instrument can be readily bought and sold in the quantities that match the CFD and is most commonly used for shares CFDs. DMA CFDs can be more expensive as the CFD provider needs to cover the exchange transaction fees and may not be able get economies of scale by netting client orders together. The DMA model is much more like a traditional broker model and is preferred by professional and institutional traders as it avoids conflicts of interest with the CFD provider.


Contract for difference - Wikipedia, the free encyclopedia

I short cut say direct CFD lah
why u so nickpicky sia?

 

[felixleong]

just dont bother with CFDs
these are complex instruments invented by the finance industry designed to suck money right under your nose with hidden charges, risks and conflict of interest

DMA is the best, your broker acts as an agent rather than a counter party. no conflict of interest

how they suck money from customers?

you know how popular CFDs are overseas or not?

 

[wahkao3]

how they suck money from customers?

you know how popular CFDs are overseas or not?

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

 

[felixleong]

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

HOW CFD SUCK $$ FROM CUSTOMERS?

 

[Sinkie]

how they suck money from customers?

you know how popular CFDs are overseas or not?

But only singapore offer cfd in whole of the asia, even Hk also no cfd

 

[Sinkie]

no meh? i not too sure

I remember when I was doing account opening that time, they tell me if corporate action sometimes may need to close the position

but like normal dividends they just pay out as usual

Usually for corporate action right like dividend etc, for cash, you receive the dividends on payable date and stock price will gap down on xd, for cfd, you will receive your dividend as cash into your free equity on xd and price gap down.

Worst scenario is dividend give 4c on xd but price gap down 40c and trigger margin call or force sell

 

[Shiny Things]

how they suck money from customers?

you know how popular CFDs are overseas or not?

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...)

 

[felixleong]

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...)

Thanks for all the information, u really very helpful man. Not like wahkao, an empty vessal. Lol

 

[Sinkie]

Thanks for all the information, u really very helpful man. Not like wahkao, an empty vessal. Lol

They are sucker when you short an index perpetually

Because when the blue chip component give dividend, they will deduct from the shortist but the index point won't adjust gap down

Damn gnn

 

[Sinkie]

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

 

[felixleong]

They are sucker when you short an index perpetually

Because when the blue chip component give dividend, they will deduct from the shortist but the index point won't adjust gap down

Damn gnn

Ya short is damn bo hua, financing cost plus dividends super pain

 

[felixleong]

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

Ya, i last time open cfd account with cmc but end up never trade, mostly because i feel that the financing cost not worth it. To borrow $$$ heavily is like paying commission everyday, sibei bo hua and eats into my returns.

Still prefer to simple buy and hold using cash, cheap cheap hehe

 

[Sinkie]

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.

 

[felixleong]

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.

Like that is hong gan liao lol

 

[wahkao3]

Thanks for all the information, u really very helpful man. Not like wahkao, an empty vessal. Lol

i not as pro as shiny things lah!

 

[wahkao3]

They are sucker when you short an index perpetually

Because when the blue chip component give dividend, they will deduct from the shortist but the index point won't adjust gap down

Damn gnn

wa i didnt know that
that's outright cheating!!!!!!!!

 

[wahkao3]

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

ah , never done this calculation b4
so now we have a magic number

14 days

 

[wahkao3]

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.

OMG!
so if a stock suddenly delist, or suspend forever, u pay interest forever lah!?

 

[wahkao3]

I am one of the China Sky holders. 4 years of suspension. I know the pain of these China xxx counters.

imagine someone shorted this on CFD
even though he's likely to make profit, he will be paying 3-4% finance charge per year and there's nothing he can do about it!!!

 

[Keverus]

ok...so the ts qn still not answered...

which is the best cfd provider? best in terms of rates. for DMA