Mandus Invest SA.

CFD stands for Contracts for Difference. It is simply margined trading. When the position is closed you pay or receive the profit or loss made on the trade.

A CFD is a derivative product and as such is not regulated on any exchange. As it is a margined product you only have to put up a fraction of the actual value of the trade you wish to do. We have introduced CFDs on Indices and Equities as well as FX onto the Meta Trader platform. These can be seen on the demo site and it is advised that you practice trading them first if you are not familiar with the product.

Many people liken CFDs (contracts for difference) to trading shares on margin, i.e. buying shares and only lodging a security deposit which is typically between 10% - 20%.

In fact it is an agreement between two parties agreeing to settle at the close of the contract the difference between the opening price and closing price of the contract, multiplied by the number of shares specified in the contract.

A simple example:
In September you might agree to buy 5000 Halifax shares at Ł6.00 (total value of Ł30,000). You lodge a 10% margin deposit of Ł3,000. In November the price of Halifax shares moves to Ł8.00 say, and you agree to sell at this level. You receive a gross profit of Ł10,000 (i.e. Ł40,000 less Ł30,000) and your deposit is returned. (Note: this is a simplistic example designed to explain the concept only. The full costs and risks of trading are explained below).

+ Increased leverage
By using CFDs you are able to control up to 10 times the stock compared with an outright purchase. This higher gearing creates greater profits if you correctly anticipate movements in the stock price, however the risk of loss also increases proportionately if the stock moves against you.

+ No stamp duty
In some jurisdictions share trading attracts stamp duty however because no physical stock transaction takes place there is no stamp duty payable on CFD transactions under the current legislation. This creates opportunities to day trade stocks without the need to cover the cost of stamp duty.

+ Easy to sell short
In many jurisdictions it is a complex and difficult process to go short in an individual share. CFDs create the ability to sell quoted shares and the potential to benefit from share price declines.

+ Risk Management
You have the ability to protect a multi-national portfolio against short-term market falls by selling sufficient CFDs to cover your exposure. If the CFDs are bought back after a decline then the profit achieved should offset the loss incurred on your portfolio.

CFDs were originally developed in the early 1990's by the derivative desk of a London based trading firm. CFDs enabled the firm's hedge-fund clients to easily sell short in the market (the London Stock Exchange) with the benefit of leverage, and to benefit from stamp duty exemptions that were not available to outright share transactions. By using CFDs, these large clients no longer needed to physically settle their equity/share transactions. They were also able to avoid the need to borrow stock when they wanted to sell short.

In the late 1990's CFDs were introduced to private clients and the retail market. Brokers offered its clients CFD products and an innovative trading system that allowed private clients to trade via the internet directly into the London Stock Exchange - the CFD revolution was born!

Individuals trading their own accounts, small fund managers and institutions were now able to trade directly into the London Stock Exchange for the first time. These clients were now on a level playing field with the large institutions. They were able to take leveraged long (bought) positions and short (sold) positions without having to take delivery of the underlying shares.

CFDs are currently available in listed [i.e. mini-warrants and ASX CFDs listed on the Australian Securities Exchange] and/or over-the-counter markets in the United Kingdom, Germany, Switzerland, Italy, Singapore, South Africa, Australia, Canada, New Zealand, Hong Kong, Sweden, Norway, Belgium, Denmark, Netherlands, France and Spain and the US (to non-residents only), with expansion into new markets occurring virtually every year. CFDs are also referred to as swaps, waves, turbo certificates, and callable bull/bear contracts (CBBCs).

The explosion in the use of this product is one of the reasons why London, as opposed to New York, is becoming the financial location of preference for many financial managers and hedge funds. Contracts for differences are not allowed in the U.S. due to legal restrictions imposed by the American Regulators.

As the UK's fastest growing instrument, CFDs have increased in popularity by 25% in recent years. They allow you to trade on the same terms as many large institutions and are one of the most exciting products around.

Market prices or better.
No fixed minimum spread or invented price.
No minimum deal size.
No minimum deposit requirement.
Low commission rates.
Low financing rates.
Low initial margins.
Separate CFD account or one account for all financial products.
No stamp duty.
Instant execution and improved liquidity.
Interest paid on your free equity balance.
Commission-free index trading.
You can trade CFDs within a tax-efficient SIPP wrapper

A CFD gives you all the benefits of the underlying cash equity whilst avoiding many of the typical costs associated with dealing in the physical share. CFD trading allows you to gain cost-effective, flexible and geared exposure to world shares and indices. We offer very competitive financing and commission charges on equity CFDs as well as tight spreads and commission free trading on Index CFDs.