Contracts for Difference and An Introduction to Exchange Traded CFDs

Exchange Traded CFD's:

Exchange traded CFD's are a new securities initiative launched in the latter half of 2007 on the ASX stock exchange. Based on the same principles as conventional contracts for difference, investors and traders enjoy greater transparency and the benefits associated with having an exchange traded and regulated clearing mechanism. In the past, the leverage associated with contracts for difference has been provided by third party brokers. Several articles provided on this site go into greater detail about the different CFD models and emphasize the benefits provided by the new exchange traded contract for difference products. The new open interest charge and the implications of corporate actions are also discussed in detail. Traders and investors participating in the new exchange traded CFD market can look forward to enjoying the traditional benefits of leverage with reduced spread and greater liquidity than that employed by third party providers under the current direct access and market maker models.

OTC Contracts for Difference:

The leverage provided by contracts for difference products has added greater diversity to the markets for traders that have been constrained by lack of access to futures alternatives. With index and sector alternatives, investors can often take positions with as little as 1% margin. CFD's have grown in popularity in countries such as Australia and the United Kingdom. The benefits of contracts for difference are magnified in short markets which permit traders and investors to collect interest on their holdings. The full implications of long, short and corporate actions are the subject of additional articles provided by this site.

Exchange Traded Funds:

Exchange traded funds have grown in popularity, particularly in the US where investors have capitalized on the ability to trade these securities long and short. With foreign emerging markets enjoying unprecedented gains, investors have been keen to gain exposure to a basket of foreign stocks. Unlike directional one way positions on stocks, exchange traded funds comprise a basket of stocks which provides a built in risk buffer against exogenous shocks that can affect individual stocks. ETF's are also constructed on commodity based products that would otherwise require participation via futures or options. With the ability to purchase on margin and use in combination with other exotic strategies, exchange traded funds are likely to continue to grow as more investors discover their benefits and they are adopted more widely on exchanges through out the world. There are additional articles provided throughout this site which introducers the reader to the types of available ETF's.

Funds:
Mutual funds and managed funds also feature heavily in the investment landscape. Suitable more for long term investing due to their heavier fees, they are used extensively as part of retirement strategy allocations. These funds are constructed on domestic and foreign constituents and provide the ability for investors to diversify their portfolio into other asset classes. You can learn more about funds by reading the articles provided by this site.

Currency Trading:

Currency trading enjoys world wide participation from inter-bank and retail traders who enjoy the twenty four hour action provided by the currency markets. With the rise of Forex, this has contributed to additional interest in currency pairs. Currency based products will continue to benefit from the introduction of new financial instruments. Exchange traded contracts for difference on cross rates is an example of this.

Futures Trading:

Futures trading enjoys extensive participation from professional bank, financial institution, proprietary and retail traders. Attracted to the benefits of leverage, futures trading tests the resolve and risk management skills of traders at all levels. You'll find additional resources throughout this site for further information on commodity futures, research avenues to pursue and places to seek information about learning futures trading.

Stocks:

Stock trading is enjoyed by investors and traders both young and old. The United States Markets are considered the powerhouse of the stock arena due to extensive and diverse range of listed securities. Many international companies seek listings on the US exchanges due to the advantages of international listing, access to capital and less regulatory compliance than domestic exchange counterparts. Traders enjoy the markets due to greater security choice, liquidity and operating hours which are convenient for European traders.

Online Trading:

The internet has changed the trading and investing landscape by providing greater access to information, new technology and cheaper commission rates. This has also contributed to the acceleration of globalization. With the current bidding wars going on between rival exchanges, this is set to continue as exchange agreements facilitate access and the creation of new products.