Contracts for Difference

CFD Trading Fees and Commissions

Most CFD providers offer competitive commission rates and comprehensive access to a research and charting center.  The commission rates on shares typically ranges from 0.1% to 0.2%.  Trades can be made over the telephone or the online trading platform.

Financing Fees

When you trade CFDs you may incur daily financing charges on positions held overnight.

If you are long, you will be paid interest; if you are short, you may receive interest.  On shares trades, for instance, overnight long positions will typically be debited a financing charge of LIBOR + 2.5%, while short positions will be credited finance of LIBOR – 2.5%.

For instance, if a trader was paying a long CFD funding charge of 2.5% over LIBOR and LIBOR was say 1.5%, the investor would be paying a funding rate of 4% per annum.  Suppose that the total trae value was GBP 10,000 the funding charge would be about GBP1.10 for every day the position is held open. (GBP400/365 days)

Dividend Adjustments

A dividend adjustment is usually credited to long positions and debited from short positions held at the close of business on the day before the ex-dividend date.  Payment is credited or debited to your trading account over the ex-dividend date.

Read more about contracts for difference on our CFD trading course.

(copyrighted to Andy Richardson August 24, 2010)