John Beveridge – Herald Sun
FULLY FRANK: The battle lines are being drawn for a memorable stoush over contracts for difference trading.
In one corner are the established CFD traders, who have literally carved out the retail over-the-counter market over the past five years.
And in the other corner is the Australian Securities Exchange, which is gearing up to start market trading of the popular leveraged instruments in the next couple of months.
Judging by comments from the established players, they won’t be saying goodbye to their customers willingly.
David Trew, managing director of the largest Australian CFD trader CMC Markets, said he didn’t think the ASX trade would put a dent in their turnover.
“CFD trading is our core business and we know how to offer a product that is attractive to the end user,” said David.
“From what I have seen of what the ASX is offering, it will not have a lot of appeal for the existing CFD trader.”
David said CMC and other providers had 24-hour trading, stop-losses and more than 2300 products to trade on.
In contrast, the ASX CFD market will only have 66 products trading at the same time as physical markets.
David claimed the ASX had a poor track record at launching new trading products such as listed options, warrants and currencies and he doubted their technology would match that of the established providers.
“There have been attempts to offer listed CFDs in other international markets and they have all failed due to a lack of liquidity,” said David.
“They say there is more transparency in their trades, but since they took away broker codes I don’t think that’s the case.”
While not wanting to respond directly to David’s complaints, ASX general manager of new markets, Ken Chapman, said there had been tremendous public and broker interest in listed CFDs.
“We have already had more than 1000 people in Melbourne confirming they will come to our free seminar next Tuesday, so I think it will be a really successful product,” said Ken.
“The three big things we will be offering are transparency, independence and investor protection.”
Ken said it was a deliberate decision to offer ASX CFDs only on stocks with deep liquidity because that is what investors are interested in.
“We think it is a really nice product that will bridge the gap between the share market and the sophisticated traders on the futures market.”
With many large brokers committed to ASX CFDs and an online education package with a trading simulator pending, Ken said he was confident the ASX product would succeed.
“The big advantage we have is that we are trading on a market, so you will be able to see turnover and all of the normal trading figures.
“And we have a strict order of preference — if your order is ahead of a big merchant bank it will be filled before them.”