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 ( IB UK ). 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 is not suitable for 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 IB UK CFDs intended to mirror performance of the underlying, including corporate actions Available for more than 4425 global equities and 15 major share indices 3

4 Who can trade? Clients that maintain 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 Description # Shares US S&P 500, S&P 400 Mid-Cap, DJ Industrials, Nasdaq 100, Other Liquid Small Cap 2175 UK FTSE Liquid Small Cap 500 Germany Dax, MDax, TecDax + Liquid Small Cap 165 Switzerland STOXX Europe 600 (48 Swiss shares) + Liquid Small Cap 140 France CAC Large Cap, CAC Mid Cap + Liquid Small Cap 145 The Netherlands AEX, AMS Mid Cap + Liquid Small Cap 62 Belgium BEL 20, BEL Mid Cap + Liquid Small Cap 58 Spain & Portugal IBEX 35, PSI Czech PX 13 OMX Stockholm 30, Copenhagen 20, Helsinki 25, OBX (Oslo) + Liquid Small Nordic Cap 204 Japan Nikkei liquid Small Cap 608 Hong Kong HSI 52 Singapore STI 33 Australia ASX TOTAL

6 Efficiency Why Choose IB UK 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 Group Execution-Quality and Transparency IB Group Strength and Security 6

7 Smart Routing CFD contracts designed to mirror underlying Uses IB Group s SmartRouter SM software 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 Group 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 Commissions on US share CFDs 11

12 IB UK Share CFDs - Pricing IB UK CFDs follow the direct market access model (DMA) similar to institutional swaps Stock CFD prices are equal to the SmartRouted SM best bid/offer of the underlying When a client submits a CFD order, IB UK immediately submits an identical hedge order for the underlying shares When the hedge order executes, IB UK 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 UK 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 UK 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 UK Share CFDs Product (cont) 33 Order types are available for CFDs, including IB Algos and on-open/on-close order types IB UK CFDs are shortable if the shares are shortable. In fact, the IB CFD offering is often better than for the shares. IB UK 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) 50% margin reduction during liquid hours 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 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 IB offers 94 currency pairs Transparent DMA quotes Carry interest IB Forex CFDs Product cont. 18

19 Conclusion IB UK CFDs are complemented by leverage, low commissions and low interest costs Universal Account offers access to multi-asset class trading at more than 100 electronic venues globally See IB MobileTrader offering for busy investors To start trading CFDs, configure Trading Permissions and sign up for Market Data for the relevant underlying exchange in Account Management 19

20 Disclosures Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations. 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. Products are only covered by the UK FSCS in limited circumstances. 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. 20