CFD Trading: A Breif History
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CFD means Contract for Difference, this is an agreement that is made between a buyer and seller. This agreement is to make good the profit or loss between when the CFD was bought and when it was sold. CFDs are common in Australia as well as in the United Kingdom. Typically CFDs are offered over shares, indices and foreign exchange contracts.
CFDs were previously known as SWAP contracts. In the early part of 2001 both CMC Markets and IG Markets began actively marketing CFDs to retail investors, this made them popular in the retail community. In the space of a few years the popularity of CFDs grew mainly because of stamp duty exemptions.
In 2002 both CMC Markets and IG Markets opened offices in Australia and began to actively promote CFDs to Australian traders, the popularity of CFDs peaked in 2007. As a result of their popularity amongst Australian traders and investors many international CFD providers saw the potential in Australia and opened up offices. At present are over 13 CFD providers operating in Australia and an estimated 35,000 retail CFD traders.
The press has drawn CFDs to the spotlight in recent times as a result of investors loosing money due to the leveraged nature of the product. This combined with the recent collapse of Sonray Capital Markets has led to the Australian regulator paying close attention to CFDs. The regulators have been primarily interested as to how providers manage client money.
Although unconfirmed it is estimated that CFDs account for around 35% of turnover on the ASX. Aside from traditional share trading this makes them the most popular financial product in Australia.
CFDs are mostly traded over the internet using a variety of trading platforms offered by the main CFD providers. Many of the CFD platforms used by CFD providers were originally developed for forex trading and later evolved into CFD trading platforms.
As Australia has the highest proportion of share ownership in the world on a per capita basis it is not surprising that most CFD traders have experience trading shares online. The historical growth of the Australian share market has made share and CFD trading a popular pass-time for Australians.
Before you run out and join the 35,000 CFD traders in Australia you must ensure that you're completely aware of the risks involved in CFD trading. Like any leveraged financial product CFDs offer major benefits however these do not come without risk. You should make sure that prior to jumping into CFD trading you read the Product Disclosure Statement (PDS) available from your CFD provider that outlines the risks and benefits of buying and selling CFDs.
Article Source: Articlelogy.com
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