The market for CFDs in Australia keeps expanding, according to new research released by Investment Trends. Research firm Investment Trends has concluded that’s Australia’s CFD market now ranks as the world’s second most evolved after the United Kingdom which remains the most evolved market.
The research also found that the number of Australians retail CFD traders had increased by 22% from 32,000 last year to 39,000, with the rise being fuelled by new traders entering the market and dormant traders resuming trading again. This represents about 6% of the 650,000 people who traded stocks online in the past year and who intend to continue, up from 5% the previous year. Like most traders in the United Kingdom, more traders in Australia are closing out positions the same day that they opened them.
The report also noted that the largest providers of CFD services were IG Markets and CMC Markets. IG Markets is now the biggest provider with respect to primary relationships with CFD traders holding 29 per cent of the market, while CMC Markets still leads in terms of total reach with 39 per cent of current traders holding an account with CMC. IG Markets’ chief executive Tamas Szabo stated the firm has about 10,000 active trading accounts.
However, CFD investors are requesting more education to help them understand the perceived high-risk, leveraged products. Investment Trends principal Mark Johnston stated that there is a much higher demand for education amongst CFD investors than in the mainstream share trading market. About 15% of stock brokers offer an advisory CFDs service while 70% of traders depend on CFD providers’ websites for information, he added. Half used a demonstration account to educate themselves before they started trading and many of them have already traded warrants and exchange traded options in the past. On average, contracts for differences comprise 21 per cent of a trader’s investable assets, he said. The median is 9%.
CFDs are still considered a niche online trading markets that attracts self-guided investors. They are commonly traded by sophisticated traders taking geared, short-term positions in volatile markets, who have traded securities frequently over several years. Attempts by some CFD brokers to promote their offerings to the mass market through mainstream media campaigns caught the attention of the corporate regulator in July.