Contracts for Difference (CFDs)

Transcription

1 Interactive Brokers presents Contracts for Difference (CFDs) Andrew Wilkinson, Interactive Brokers Chief Market Analyst Webinar 12:00 pm EST webinars@interactivebrokers.com Member SIPC 1

2 Disclaimer CFD trading of UK FTSE listed stocks is available through Interactive Brokers (U.K.) Limited. Trading of other products such as stocks, options, Australian CFDs and futures is available through our U.S. affiliate, Interactive Brokers LLC, a U.S. registered company regulated by SEC and CFTC. A CFD is a leveraged product which carries a high degree of risk and your loss may exceed your initial investment. Therefore, CFD trading may not be suitable to all investors. You must ensure that you understand the risks involved when trading this product and seek independent advice if necessary. Certain financial products are not suitable for all investors and customers should read the relevant risk warnings before investing. Your capital is at risk and your losses may exceed the value of your original investment. Certain products (like CFDs) are covered by the UK FSCS compensation scheme whilst others may be covered under SIPC. 3 [3] For additional information visit or ibkr.co.uk/sipc and refer to your client agreement. Interactive Brokers (U.K.) Limited is authorised and regulated by the Financial Conduct Authority. FCA register entry number Interactive Brokers LLC is regulated by the US SEC and CFTC and is a member of the SIPC ( compensation scheme. 2

3 What is a Contract for Difference or a CFD? A CFD is an agreement to exchange the difference between the opening and closing value of a share, index or commodity An agreement between client and Interactive Brokers CFDs intended to mirror performance of the underlying, including corporate actions Available for more than 3100 global equities and 13 major share indices 3

4 Who can trade? All margin accounts excluding U.S., Canadian, Australian and Hong Kong residents The U.S. exclusion does not apply to a manager who trades through an off-shore entity 4

5 IB Share CFDs - Offering IB Share CFDs Description # Shares US S&P 500, S&P 400 Mid-Cap, DJ Industrials, Nasdaq 100, Other Liquid MidCap 1,672 UK FTSE Liquid Small Cap 509 Germany Dax, MDax, TecDax + Liquid Small Cap 159 Switzerland STOXX Europe 600 (48 Swiss shares) + Liquid Small Cap 138 France CAC Large Cap, CAC Mid Cap + Liquid Small Cap 139 The Netherlands AEX, AMS Mid Cap + Liquid Small Cap 62 Belgium BEL 20, BEL Mid Cap + Liquid Small Cap 53 Spain IBEX Czech PX 14 Sweden OMX Stockholm 30 + Liquid Small Cap 101 Finland OMX Helsinki 25 + Liquid Small Cap 38 Denmark OMX Copenhagen 20 + Liquid Small Cap 38 Japan Nikkei TOTAL 3,190 5

6 Efficiency Why Choose IB CFDs? Higher leverage Lower commissions Full tax treaty benefits for dividends No Stamp Duty - 10,000 trade incurs 50 tax Flexibility No high multiples like for futures IB Execution-Quality and Transparency IB Strength and Security 6

7 Smart Routing CFD contracts designed to mirror underlying Uses IB SmartRouter Features DMA model Algorithms and other order types available No quote widening* *(except briefly during material news announcements) 7

8 Integrated Software Low Commissions Pricing Leverage Low Interest Costs IB Advantages 8

9 TWS Integrated Software Over 100 Global electronic venues Stocks, options, futures, forex, bonds, funds, spot gold and CFDs Universal Account 9

10 Low European Commissions Trade Value * 0.05% with minimum EUR 3.00 E.g. EUR 10,000 nominal trade value incurs EUR 5.00 fee 10

11 Low US Commissions 11

12 IB Share CFDs - Pricing IB CFDs follow the direct market access model (DMA) similar to institutional swaps Stock CFD prices are equal to the SmartRouted best bid/offer of the underlying When a client submits a CFD order, IB immediately submits an identical hedge order for the underlying shares When the hedge order executes, IB fills the client s CFD at the actual execution price for the hedge The client gets the same fill as if he were trading the underlying share directly A non-marketable CFD order will create a matching non-marketable order for the underlying shares on the exchange. Clients can view "their order" on the level 2 book 12

13 IB Share CFDs Margin Efficiency and Risk Control greater notional amount of an investment Magnifying price movements - works both ways increased leverage also means increased risk CFD margins lower than margins for stocks* IB UK sets risk-based margins on OTC CFDs, rather than the regulatory margins for stocks MARGIN CFD STOCK Margin Type All Standard Portfolio Margin Margin Requirement* 10% 25% - 50% 15% * Minimum margin may be higher for volatile stocks 13

14 Low Interest Costs Trading costs impact investors bottom line Investors employing leverage must borrow from broker IB charges a low spread above a standard benchmark We challenge you to find a better combination of low commissions and low interest rates 14

15 Financing Leveraged Trades This example uses 10:1 leverage 30,000 nominal trade controls 300,000 notional value Example does not consider daily price fluctuations 15

16 IB Share CFDs Product (cont) 33 Order types are available for CFDs, including IB Algos and on-open/on-close order types IB CFDs are shortable if the shares are shortable. In fact, the IB CFD offering is often better than for the shares. IB CFDs incur the same short charges as for the shares Daily P&L (variation margin) Regular trading hours only, plus opening and closing auctions Market data subscription required for underlying Global CFD trading permission needed 16

17 IB Index CFDs Product cont. Executions are guaranteed at the quoted prices up to the bid/ask sizes (50 CFDs for IBDE30, the equivalent of 2 futures) Same margin as for the related future, adjusted for size (subject to a 5% minimum) Daily P&L variation margin Ordinary dividends are paid for the constituents of each index Corporate actions are reflected in the index level, no direct adjustments for CFD Index CFDs are shortable, like the related future European and US IB Index CFDs trade 09:00-22:00 CET. Asian IB Index CFDs trade Regular Exchange Hours Index CFD market data is free Index CFD permissions are included in the global CFD trading permission 17

18 Conclusion IB CFDs are complemented by IB s leverage, low commissions and low interest costs IB Single Universal Account offers access to multi-asset class trading at more than 100 electronic venues globally See IB MobileTrader offering for busy investors Gold Winner for Trade2Win Best CFD Broker To start trading UK CFDs, configure Trading Permissions and sign up for Market Data for the relevant underlying exchange in Account Management 18

19 Disclosures Certain financial products are not suitable for all investors and customers should read the relevant risk warnings before investing. Your capital is at risk and your losses may exceed the value of your original investment. Interactive Brokers LLC is regulated by the US SEC and CFTC and is a member of the SIPC ( compensation scheme; products are only covered by the UK FSCS in limited circumstances. Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations. Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by calling (312) Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading security futures, please read the Security Futures Risk Disclosure Statement. A copy is available here. Exchange and Industry Sponsored Webinars are presented by unaffiliated third parties. Interactive Brokers LLC is not responsible for the content of these presentations. You should review the contents of each presentation and make your own judgment as to whether the content is appropriate for you. Interactive Brokers LLC does not provide recommendations or advice. There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets. Interactive Brokers (U.K.) Limited is authorised and regulated by the Financial Services Authority. FCA register entry number Our office in UK: 1 Carey Lane, Fifth Floor, London EC2 V8AE. Please click here. 19