Exchange Traded CFDs / Commsec ASX CFDs

Q:What are Exchange Traded CFDs?

A: Most CFDs aren’t listed on an exchange and are traded over-the-counter. The CFD broker takes your order to buy or sell shares in the market charging you a small commission in the process. Typically the provider requires you to put in an initial margin amount and provide the rest of the finance in exchange for daily interest.

An exchange traded CFD is an alternative arrangement (at the present time only set up on the Australian Stock Exchange) where CFDs are quoted directly on the exchange with the price including margin and financing as a standardized contract.

Q:What is the difference between Commsec ASX CFDs and Commsec OTC CFDs?

A: The ASX CFDs on the the ones that Commsec trade through the SFE (Sydney Futures Exchange), and are put up by ASX Limited. They have different rules (i.e. things like calculating daily settlement prices which do not match the actual share price, complicated margin requirements…etc). Here, you are buying the shares from the market, NOT from Comsec. Your profits comes from the other market participants, not from Mr. Comsecs’ pocket. An analogy would be playing a game of poker for money. Your profits come from the other players, not from the dealers’ pocket. Comsec is like the dealer, Comsec just facilitates the transfer of shares from one person to another.

The Commsec OTC CFDs on the other hand are the market maker type CFDs such as those provided by IG/CMC/ etc…