Features of Exchange Traded CFD's (Contracts for Difference)

2. Short Selling: The ability to short sell securities not already owned.

3. Reduced transaction costs: With multiple market makers Optiver Australia Pty Ltd, Susquehanna Pacific Pty Ltd, Merrill Lynch Australia, (Commonwealth Bank of Australia, UBS Australia, and Timber Hill Australia Pty Ltd) traders will not be required to accept the prices of a single market maker. This will result in improved liquidity and a reduction in the spread between bid and offer. The conventional spread offered by CFD providers constitutes a cost to the trader so a reduction in this practice is a positive development for the traders bottom line.

4. The central counter party clearing model will negate the financing charges utilized by Over the Counter CFD providers reducing the cost of carry significantly. The savings from this development are passed directly onto the market.

5. Franking Credit Cashflow: In addition to the Dividend/Yeild Cash flow, Exchange Traded CFD’s include a cashflow which represents the value of any applicable franking credit. Holders of short positions pay the Franking Credit Cashflow. Holders of long positions receive the Franking Credit Cashflow discounted by the percentage of open short positions held by the designated price makers.

6. Reduced Exposure to Broker Failure: The SFE Clearing Corporation (SFECC) will provide central counter-party clearing ie trades are carried out with SFECC and not with the original party to the trade. The positions are managed by SFECC via the established margining system currently used by the global futures market. The trades will be backed by the Exchange Clearing Guarantee Fund which negates creditworthy exposure that exists under non-exchange CFD brokers and traders.

7. Market Regulation: The Australian regulator ASIC will oversee the activities of the entire market. ASX regulation teams will be responsible for monitoring any unusual activity and trading conditions deemed to be unfair thereby safeguarding participants.

8. Accredited Brokers: Only accredited brokers will be able to offer Exchange Traded CFD’s.

9. Standardisation And Consistency: Exchange Traded CFD’s have standardized contract specifications, a transparent, consistent operating model and are subject to SFE operating rules. Those trading Exchange Traded CFD’s will benefit from full anonymity of position and trades.



An article on exchange traded cfd margins.