The History Of CFD Trading In Australia
CFD stands for Contract for Difference, CFDs are a financial agreement made between a buyer and seller to make good the profit or loss incurred between when the CFD was purchased to when it was sold. CFDs are common in both Australia as well as the UK, they are mostly offered over indices, stocks and currencies.
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.
Recently CFDs have received much attention as a result of investors loosing money due to the leveraged nature of the product and market volatility. This negative publicity combined with the collapse of Sonray Capital Markets has led to increased scrutiny from ASIC, the Australian regulator. The scrutiny has primarily focused on how client money is managed.
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.
Like shares CFDs are mostly traded on-line over the internet. CFDs are primarily traded using platforms offered by the main CFD providers. Many of these platforms were originally developed to trade currencies but were quickly adapted to share CFDs.
CFD trading is popular amongst on-line share traders. Share trading is extremely popular in Australia, in fact on a per capita basis Australia has the highest proportion of share ownership in the world.
It is important to note that before opening a CFD trading account you are aware of the the risks involved in trading CFDs. The gearing CFDs offer provides the potential to make money, however you should be aware that you could also loose money. CFD providers must issue Product Disclosure Statements explaining the benefits and risks of the product, it is important that you read this document before you start trading CFDs.
Looking to find the best deal on CFDs, then visit www.icmarkets.com.au to find the best advice on CFD trading.
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