What are the costs of trading a CFD?
There is a commission cost, which is usually around 0.25% for a typical client, however this can be substantially reduced for higher volume traders.
There are also holding costs where interest is charged for a bought CFD and where interest is paid for sold CFDs.
Dividends, and Rights Issues can add to costs if you are short or provide additional income if you are long (see answers below on dividends).
Do I need a multi currency account to trade CFDs in different jurisdictions?
No we accept accounts in all major currencies.
Is stamp duty payable on CFD transactions?
At present under current legislation there is no stamp duty to pay on CFD trading with the exception of Ireland where stamp duty is payable on any CFD on an Irish Equity, which is held for more than 29 working days.
Are there any limitations on short selling?
Usually there are no limitations on short selling. Occasionally if a stock is difficult to borrow there could be additional borrowing costs associated with short selling the stock.
On rare occasions when it is impossible to borrow a stock we cannot allow traders to short sell.
Each week we produce a list of US, European and UK Equities, which are difficult to borrow.
Do I see all my working orders on the exchange?
On all European and UK exchanges it is always possible to see you working CFD order actually on the relevant exchange.
In the US with their multiple exchanges because we always route orders to the greatest pool of liquidity where the chances of execution are maximised it is not always possible to see your working orders on an exchange.
How secure are my funds?
MF Global is one of the largest brokerage companies in the world.
Although CFDs are an OTC (over-the –counter) product on occasions it is also possible to request that funds are segregated.
Can I trade less liquid stocks?
It is often possible to trade stocks with a market capitalisation of as little as £10, however in cases where stocks have a small capitalisation the margin requirement will be higher due to the increased risk.
How are dividends, stock splits and rights issues handled?
Policies vary slightly by region, however holders of long CFDs will normally receive from 85% to 90% of any dividend paid, whilst holders of sold CFDs will pay between 90% to 100% of any dividend.
“Stock Splits” are usually just reflected in the account without any cost implications.
For “Rights Issues”, holders of long CFDs receive 100% of the rights whereas holders of sold CFDs are given short rights in their account.
Can I convert my CFD into stock?
This is possible on a case-by-case basis subject to compliance approval.
Can I use stock as margin for trading?
Yes, however the value which can be used for initial margin purposes will be hair cut subject according to the quality of the stock lodged.
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