Exchange Traded Contracts for Difference (CFDs)
A Contract for Difference (CFD) is listed and traded on the Exchange and cleared by the appointed clearing house for the JSE. The underlying asset is an Equity that is cash settled on expiry. A CFD is defined as an agreement to exchange the difference in value of a particular asset between the time at which a contract is opened and the time at which it is closed. Dividends are taken into account unlike a Standard Single Stock Future. A funding spread is charged on a daily basis and paid from the long to the short holder.
Who is this for?
eCFD’s are simpler to understand and trade and are used by both private and professional investors. Hedgers use CFDs to protect an existing Share portfolio against adverse price movements while speculators use the product to realise a profit on short-term movements of the underlying Shares. Market participants can go long or go short as they see fit.
- Eliminates counter-party default risk.
- Gearing provides a capital efficient way to gain exposure to basket of Shares. This creates greater volatility which amplifies gains and losses..
- Full exposure to the deep and liquid underlying equity Spot Market..
- Funding offsets for multiple positions.
- Lower brokerage fees than actually trading in the underlying.
- Provides short selling opportunities to benefit from downward price movements.