Contracts for Difference (CFDs)

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[email protected] www.ibkr.com/webinars

Contracts for Difference

(CFDs)

Interactive Brokers

presents

Andrew Wilkinson, Interactive Brokers

Chief Market Analyst

[email protected]

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Disclaimer



_{CFD trading of UK FTSE listed stocks is available through Interactive Brokers (U.K.) Limited. Trading of other}

products such as stocks, options, Australian CFDs and futures is available through our U.S. affiliate,

Interactive Brokers LLC, a U.S. registered company regulated by SEC and CFTC.



A CFD is a leveraged product which carries a high degree of risk and your loss may exceed your initial

investment. Therefore, CFD trading may not be suitable to all investors. You must ensure that you

understand the risks involved when trading this product and seek independent advice if necessary.

Certain financial products are not suitable for all investors and customers should read the relevant risk warnings before

investing. Your capital is at risk and your losses may exceed the value of your original investment. Certain products (like CFDs) are covered by the UK FSCS compensation scheme whilst others may be covered under SIPC.3

[3]_{For additional information visit http://www.fscs.org.uk/ or ibkr.co.uk/sipc and refer to your client agreement.}

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What is a Contract for Difference or a CFD?

• A CFD is an agreement to exchange the difference between

the opening and closing value of a share, index or commodity

• An agreement between client and Interactive Brokers

• CFDs intended to mirror performance of the underlying,

including corporate actions

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Who can trade?

• All margin accounts excluding U.S., Canadian,

Australian and Hong Kong residents

• The U.S. exclusion does not apply to a manager who

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IB Share CFDs - Offering

IB Share CFDs

Description

# Shares

US S&P 500, S&P 400 Mid-Cap, DJ Industrials, Nasdaq 100, Other Liquid MidCap 1,672

UK FTSE 350 + Liquid Small Cap 509

Germany Dax, MDax, TecDax + Liquid Small Cap 159

Switzerland STOXX Europe 600 (48 Swiss shares) + Liquid Small Cap 138

France CAC Large Cap, CAC Mid Cap + Liquid Small Cap 139

The Netherlands AEX, AMS Mid Cap + Liquid Small Cap 62

Belgium BEL 20, BEL Mid Cap + Liquid Small Cap 53

Spain IBEX 35 39

Czech PX 14

Sweden OMX Stockholm 30 + Liquid Small Cap 101

Finland OMX Helsinki 25 + Liquid Small Cap 38

Denmark OMX Copenhagen 20 + Liquid Small Cap 38

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Why Choose IB CFDs?

• Efficiency

–

Higher leverage

–

Lower commissions

–

Full tax treaty benefits for dividends

–

No Stamp Duty - £10,000 trade incurs £50 tax

• Flexibility

–

No high multiples like for futures

• IB Execution-Quality and Transparency

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Smart Routing

• CFD contracts designed to mirror underlying

• Uses IB SmartRouter

• Features DMA model

• Algorithms and other order types available

• No quote widening*

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IB Advantages

• Integrated Software

• Low Commissions

• Pricing

• Leverage

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TWS Integrated Software

• Over 100 Global electronic venues

• Stocks, options, futures, forex, bonds, funds, spot

gold and CFDs

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Low European

Commissions

Trade Value * 0.05% with minimum EUR 3.00

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IB Share CFDs - Pricing

IB CFDs follow the direct market access model (DMA) similar to

institutional swaps

–

Stock CFD prices are equal to the SmartRouted best bid/offer of the

underlying

–

When a client submits a CFD order, IB immediately submits an identical

hedge order for the underlying shares

–

When the hedge order executes, IB fills the client’s CFD at the actual

execution price for the hedge

–

The client gets the same fill as if he were trading the underlying share

directly

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IB Share CFDs – Margin Efficiency and Risk

• Control greater notional amount of an investment

• Magnifying price movements - works both ways – increased leverage also means increased risk

• CFD margins lower than margins for stocks*

• IB UK sets risk-based margins on OTC CFDs, rather than the regulatory margins for stocks

MARGIN

CFD

STOCK

Margin Type

All

Standard

Portfolio

Margin

Margin Requirement*

10%

25% - 50%

15%

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Low Interest Costs

• Trading costs impact investors’ bottom line

• Investors employing leverage must borrow from broker

• IB charges a low spread above a standard benchmark

• We challenge you to find a better combination of low

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Financing Leveraged Trades

• This example uses 10:1 leverage

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IB Share CFDs – Product (cont)

• 33 Order types are available for CFDs, including IB Algos and

on-open/on-close order types

• IB CFDs are shortable if the shares are shortable. In fact, the IB

CFD offering is often better than for the shares. IB CFDs incur

the same short charges as for the shares

• Daily P&L (variation margin)

• Regular trading hours only, plus opening and closing auctions

• Market data subscription required for underlying

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IB Index CFDs – Product cont.

• Executions are guaranteed at the quoted prices up to the bid/ask sizes (50 CFDs for

IBDE30, the equivalent of 2 futures)

• Same margin as for the related future, adjusted for size (subject to a 5% minimum)

• Daily P&L variation margin

• Ordinary dividends are paid for the constituents of each index

• Corporate actions are reflected in the index level, no direct adjustments for CFD

• Index CFDs are shortable, like the related future

• European and US IB Index CFDs trade 09:00 - 22:00 CET. Asian IB Index CFDs trade

Regular Exchange Hours

• Index CFD market data is free

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Conclusion

• IB CFDs are complemented by IB’s leverage, low commissions

and low interest costs

• IB Single Universal Account offers access to multi-asset class

trading at more than 100 electronic venues globally

• See IB MobileTrader offering for busy investors

• Gold Winner for Trade2Win Best CFD Broker

• To start trading UK CFDs, configure Trading Permissions and

sign up for Market Data for the relevant underlying exchange

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Disclosures

Certain financial products are not suitable for all investors and customers should read the relevant risk warnings before investing. Your capital is at risk and your losses may exceed the value of your original investment. Interactive Brokers LLC is regulated by the US SEC and CFTC and is a member of the SIPC (www.sipc.org) compensation scheme; products are only covered by the UK FSCS in limited circumstances.

Any stock, options or futures symbols displayed are for illustrative purposes only and are not intended to portray recommendations. Options involve risk and are not suitable for all investors. For information on the uses and risks of options, you can obtain a copy of the Options Clearing Corporation risk disclosure document titled Characteristics and Risks of Standardized Options by calling (312) 542-6901

Security futures involve a high degree of risk and are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading security futures, please read the Security Futures Risk Disclosure Statement. A copy is available here.

Exchange and Industry Sponsored Webinars are presented by unaffiliated third parties. Interactive Brokers LLC is not responsible for the content of these presentations. You should review the contents of each presentation and make your own judgment as to

whether the content is appropriate for you. Interactive Brokers LLC does not provide recommendations or advice.

There is a substantial risk of loss in foreign exchange trading. The settlement date of foreign exchange trades can vary due to time zone differences and bank holidays. When trading across foreign exchange markets, this may necessitate borrowing funds to settle foreign exchange trades. The interest rate on borrowed funds must be considered when computing the cost of trades across multiple markets.