Talk:Contract for difference

IP Nature

It appears that a CFD is simply a pair of nonexpiring options, which are patented in the European Union. Where is the discussion of the IP nature of this product?

The Contra view of Andres opinion is that a CFD is a commercial product that is constantly being refined, and as such the main sources of information pertaining to its relevancy as a derivative financial instrument will be contained within commercial websites. In addition the article has been added to by a commercial organisation and gives a favourable slant to that particular organisation. - Duncan Hickman, Director, Share Select Pty Ltd. 5 December

Being of the opinion that Wikipedia is not an advertising medium, I have removed all the links at the bottom of the page - to my feeling they were meant more for advertising companies that trade in CfDs than in informing the public. None of them gave significantly more information than the Wikipedia article itself. - Andre Engels 13:26, 29 November 2005 (UTC)

My kingdom for an impartial economist. This article seems to be very biased on favour of CFDs with statements like "you can of course lose more than you put in, however..." and "All forms of margin trading involve financing charges..." Talk about slanted. CFDs are extremely high risk and only work if you are 'day trading', ie, staring at equity movements and constantly changing your position - all the while paying fees for the service and usually eith your own money ending up in the red. I wish I had the knowledge to make this article more balanced; CFDs are being pushed hard by providers now and people need an objective analysis that isn't so soaked in gobbledegook like "previously agreed rate above or below LIBOR or other interest rate benchmark. Users pay to finance long positions and (may) receive funding on short positions". I wish more governments would outlaws CFDs - that would clear things up. --DreamsReign 02:02, 27 March 2006 (UTC)

Research it before you start slagging it off then; CFDs are of course a double-edged sword, as is the entire financial market, it just happens that CFDs have sharper edges, but simply put, I strongly disagree that CFDs should be banned since if one would simply take the time to apply the appropriate risk and money management, they prove to be a highly useful tool. --Olipro(IP)

Hi I have deleted the following words "searching google" in the page. The previous quotation was as follows: "There are a number of CFD dealers in the market, and many can be found online by simply searching Google, or any other search engine of your choice, here are a number of well known companies;" My purpose in doing so was to prevent bias in the search engines people use. I don't think Wikipedia should implicitly recommend the use of one search engine over another - as the previous quote did so. The correction makes the sentence less biased, however pedantic my point may be.

First sentence

The first two sentences are ambiguous. The term "difference" implies "absolute difference", which is always positive. The second sentence mentions the case "If the difference is negative...", which is impossible for an absolute difference so clearly the author is intending to refer to a net change in price, not a difference between two prices. The major problem with this is that its unclear whether the author means x-y or y-x. Is it current price - contract time price or contact time price - current price? Technically, the final value of the contract depends on the position on the contract. The one party always makes x-y while the other party makes y-x for any given contract, but in this case who is formally defined as the buyer and who is formally defined as the seller? Does it depend on who is long or shot? Skyxie (talk) 17:01, 13 November 2008 (UTC)

The first sentence of this article doesn't say what a CFD _is_. It says that it is something which is an example of an equity derivative, and it tells us what it allows users to do. But it doesn't say what it _is_.

Unfortunately I don't yet know what it is, so I can't fix it. 82.36.100.133

Here is what I propose as the definition of CFD. Comments welcome.

A CFD is a contract between two parties, B ("buyer") and S ("seller"), stipulating that S will pay to B the difference between the current value of an asset and its value at contract time. (If the difference is negative, then B pays to S.)

"CFDs have varying brand names, depending on who issues them. For example they are sometimes called Turbo Certificates or Waves. In Hong Kong, they are referred as Callable Bull/Bear Contracts (CBBCs)." These are not CFDs but warrants with expiry dates.

I think it's obvious that an investor is required to finance his long positions if held overnight. But why does he receive funding on short positions?

I have deleted the link to Share Select within the text. A comparison of DMA and MM providers should be added to this site if required. A link to an external website is not necessary. —Preceding unsigned comment added by Gumbypants (talk • contribs) 11:14, 18 June 2008 (UTC)

Corrections

I have deleted the quote of a broker :"a broker such as XXX",it's obviously free advertising in an encyclopedia article,+ corrected a weak argumentation largely in favor of CFD: Yes, maybe CFDs are a bit more flexible if you have a low deposit(<15k$) compared to futures, but futures are regulated in most countries they have less fees,more transparency and you don't go through a market maker(which means that the house doesn't trade against you if you trade with a serious/pro broker). I think that the part when they say you can have guaranteed stoplosses etc... is true but overlooks the dangers of leverage(for instance with a 1% margin,you can have a 100:1 leverage,that means your account can be completely wiped out in less than a few hours). + when they say :"CFDs are extremely high risk and only work if you are 'day trading'",it's not always true and depends on the leverage used and the underlying(for instance silver can have a range of 10%+ a day ),you can use low leverage with CFDs,and they don't only work if you are 'day trading',on the other hand 'day trading' always works for the broker who harvests the fees. So most of this is total BS.

There was a lot of bias particularly towards the ASX CFD product. Many of the statements were grossly misleading and in some cases incorrect. —Preceding unsigned comment added by Gumbypants (talk • contribs) 11:12, 18 June 2008 (UTC)

I get the impression that the "criticism" section has been edited by someone who likes to sell CFD's. I'd like to provide two examples:

+", however prices of CFDs are based on publicly available underlying instruments and odds are not stacked against traders as the CFD is simply the difference in underlying price." +"Although the incidence of these types of discussions may be due to traders' psychology where it is hard to internalise a losing trade and instead they try to find external source to blame."

About CFD dealer reputation

I disagree, I believe that the offering of CFDs, as well as other derivative products by a firm is a good sign of a professional outfit. Most firms will only commit experienced investors to such products, and will make sure that the client is well aware of the high risks that are involved in trading in such a manner. To label most firms that offer CFDs as "bucket shops" shows that the original author of this particular article obviously works for a big house, and therefore think his/herself better than everybody else! —Preceding unsigned comment added by 81.145.240.229 (talk • contribs)

Answer for {unsigned|81.145.240.229}: There has to be a misunderstanding somewhere,I didn't intend to label a firm that offers CFDs as bucketshop,I was just referring to some of the retail brokers that are among the links at the bottom of the page here http://en.wikipedia.org/w/index.php?title=Contract_for_difference&oldid=88695663(ranging from the small ones to the several hundred-million ones)excluding banks of course xD. Of course brokers at the institutional level hedge the trades,maybe even a few ones offer access to mid-high networth individuals. And CFDs are a wonderful product,because regulation is so weak now,a group of hedge funds recently bought a huge stake of BAE systems(something like 20%) with CFD without having to warn the british regulator...

Another opinion: This section should be explained better or even removed. The structure of the arguments is hard to follow or might be wrong, and a word like "bucketshop" does not belong in a serious article. If the author feels compelled to focus on improper behavior on behalf of the brokers, rather than properties of the product, I suggest he studies an article like the one on lottery. Even though the expected payout from lotteries is negative, no moral judgment is presented as implied in a description of "reckless" marketing practices. Nstender 13:14, 20 December 2006 (UTC)

I agree , I think that the word bucketshop shouldn't belong to a good article,but anyway,when I first looked at the article,it looked like a SPAM,so my intent was just to balance the article, now that I have deleted this section(which could be irrelevant),I decided to change a section(additional benefits of CFDs) in giving a comparison of CFDs and futures,which I think is a bit more neutral than the old section.

learnmoney.co.uk

I am Alex Green the Editor of the LearnMoney.co.uk website and have been adding a link to the site on this Wiki page. However, this link is always removed.

But if you look at the site there is a whole section offering free CFD help and information. Yes, there is some advertising but it is discreet.

I therefore believe that readers of Wiki who are interested in CFDs will get a lot more information on what CFDs are, and their application from the LM.co.uk site.

To summarise, the link is there to enhance the Wiki information on CFDs.

If you would like to contact me regarding this please use the following link –

http://www.learnmoney.co.uk/contact.html —Preceding unsigned comment added by Anley (talk • contribs)

Alex, you seem to be adding links to your site on other articles too. I checked the contents of the linked article, and it is merely a stub which doesn't add any useful information which isn't already here. Furthermore, the link you add is incorrect--you didn't even bother to check your edit. Please refrain from adding links for the sole purpose of promoting your site. I wouldn't go as far as calling this 'spam', but the added value is nil. Owen× ☎ 20:20, 12 June 2007 (UTC)

Yes, I added a link to the 'Spread Betting' section on Wiki and I cannot understand what's wrong with that as the LM.co.uk carries over 200 pages of quality content relating to that topic versus Wiki's 1, or maybe 5 if you spread it out.

I just don't accept that you can even use the word 'Spam' as the LearnMoney.co.uk section on CFDs has far more information than the Wiki site. Am I promoting the site, sure but only as a extra information resource.

And with respect who gives you the right to be judge and juror on this matter?

Also, why is the link to http://www.poems.com.sg/cfd/ being uphelp, surely that page if you look at it defines your argument of 'adding nothing of value'?

By the way, don't mean to be rude in all of this. Have a nice day!

I've also rewritten most of the final section on 'Risk' as a lot of it was wrong (1% margin for example!) and in my opinion wouldn't have really helped anyone new to CFDs. Please feel free to change any of it (I haven't had time to get my copy editor check it) but please make sure people get the facts right as I'm still shocked by the 1% part.

Been reading the 'Charges' section and it's very light on information especially when it comes to how interest is handled on short positions. I'm also surprised that whoever wrote it (or subsequent editors) haven't put some tables in to show exactly how the financing works.

There is also nothing on the critical aspect of how dividends are handled for both longs and shorts which is surprising.

Ultimately, this Wiki on CFDs is lightweight. Would you like me to rewrite most, if not all of it, and expand it by at least several hundred percent?

Alex, I'm glad to see you are contributing to the article. I'd like to remind you, however, that we have rules against using Wikipedia to promote your own website, regardless of how informative it is. Please familiarize yourself with Wikipedia:External_links#Links_normally_to_be_avoided and Wikipedia:Conflict_of_interest before making accusations against me. No one has made me judge or juror on this matter, but the community has entrusted me with certain administrative tools to enforce our policies and guidelines. I would kindly ask you to adhere to those rules. If you feel you are unjustly targeted, you are welcome to solicit help from experienced Wikipedia editors.

Three other points I'd like to mention:

• Please avoid using copyrighted text from your (or any other) website. Even if you hold the copyright to it, we cannot use it here.
• If your copy editor helps you with this article, please make sure they edit using their own account. We don't allow shared or "corporate" accounts, to avoid licensing and copyright attribution issues.
• Please sign your comments on this and other Talk pages using ~~~~.

Alex, I am happy to see this article get beefed up. Being a former futures trader myself, I had no idea what the margins on CFDs are, although the 1% figure did seem unlikely. Let me know if you need any help. Owen× ☎ 19:07, 13 June 2007 (UTC)

ASX CFDs

26 september 2007 - Nice to see the ASX taking so much time to advertise their new product on this page. a very one-sided summary of a product that hasn't even been launched yet! from a corporation that cannot even maintain it's own trading systems (i.e. the 'maintenance' of the SFE system at midday on the 16th August that stoppped futures trading for over on hour) - Anybody else agree that talking about benefits of cheaper transaction costs should wait until the ASX announces what they are?

Sounds like margin call - merger

this CFD sounds very much like a margin call? I'm no expert, but if it is maybe we could merge the pages?!? —Preceding unsigned comment added by ToyotaPanasonic (talk • contribs) 02:19, 31 December 2007 (UTC)

Oh my God. How the fuck could you say so? A margin call is an event triggered by a sharp change in an equities value where your lender demands capital injection or else sells off some of your equity. Admittedly this page is crap (seems to be written half by the ASX and half by CommSec), but without knowing ANYTHING about financial products why contribute to the discussion?

I wonder if there is an error in the following paragraph:-

'It was around 2000 that retail investors realised that the real benefit of trading CFDs was not the exception from stamp tax but the ability to trade on leverage on any underlying instrument. This was the start of the growth phase in the use of CFDs. The CFD providers quickly responded and expanded their product offering from just London Stock Exchange (LSE) shares to include indexes, many global stocks, commodities, treasuries, and currencies. Trading index CFDs, such as the ones based on the major global indexes e.g. Dow Jones, NASDAQ, S&P 500, FTSE, DAX, and CAC, quickly became the most popular type of CFD that were traded.'

In the second line the word 'exception' is used. Should this read 'exemption' ? —Preceding unsigned comment added by 81.130.192.45 (talk) 11:29, 21 October 2009 (UTC)

Yes, my mistake I meant to say exemption, and have corrected it. 125.237.79.139 (talk) 23:08, 6 November 2009 (UTC)

Article structure

I think that we should explain the CFD before comparing it to other products and describing difference between OTC and exchange traded, so have re-organised the section accordingly. I have put the example section first as this is the best way to explain it but I agree the example section is poor and somebody needs to make that better, might have a go at that sometime.

Exchange traded CFDs are a very small percentage of all CFDs and only specific to Australia and so seems out of proportion to have so much of the CFD page devoted to it. Although there are no publish figures for OTC CFDs, the total volume traded by ASX since inception is about the same as one of the major CFD providers does each month and so is not significant when considering CFDs globally. Therefore I have removed one section re ASX CFDs and added the only relevant fact, the number of brokers, to the history page. I also think the section comparing OTC vs exchange is generic and mostly true for all financial products and not CFD related so I dont think it should be here at all. It is also a bit of a sales pitch for ASX when in fact exchange traded has a very small number of products and represent a small percentage of the market, however I have left this section for now in case somebody disagrees but just moved it to the end.

Also changes the comparison section to other instruments from just talking about futures. There are a few good points mentioned but again this section could so with a clean up. I have separated out the facts for now, without changing the language, but might better as a list. Might be worth taking each type of product that do similar things and comparing it as impartially as possible. So futures, options, margin lending, warrants etc. 125.237.79.139 (talk) 09:42, 7 November 2009 (UTC)

I have expanded the comparison to other products and broken it down by product. I have also added in two detailed examples, I have left the original example for now, although I think it can now be removed, does anybody have any opinion on this? I also added in a section on CFD providers, initially to add a section comparing DMA to market market model which is still to be done, but a bit reluctant now as might be spam magnet. Sargdub (talk) 05:43, 30 November 2009 (UTC) I have reduced and consolidated the Australian exchange section to simplify it and add more balance, still think its too big a section for the amount of CFDs using this method, but will leave it at that for now. Added a criticism section so there is a home for it and added the main concerns I know about trying hard to keep NPV. Also moved the limited comparison of MM and DMA that was under the Australian exchange section to CFD provider section and expanded it. Sargdub (talk) 11:28, 12 January 2010 (UTC)