Contract for Difference


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Contract for Difference

Also known as CFD. This is an agreement between buyer and seller to exchange the difference between the current value of the asset and the initial value of the asset when the contract is initiated. For example, suppose the initial price of share XYZ is $100 and a CFD for 1000 shares is exchanged. Both the buyer and seller must post some margin. If the price goes to $105, then the buyer gets $5,000 from the seller. If the price goes to $95, the buyer pays the seller $5,000. This contract avoids ownership of the stock and all the associated transactions issues (like stamp taxes). The contract also allows for leverage (typically 10:1) because the margin that must be posted is only a fraction of the value of the underlying asset. These contracts can also be on the difference of two assets' prices. They can also be on the difference of a single asset of different maturities (like a bond or futures contracts). CFDs are sometimes known as spread trading.
References in periodicals archive ?
BEIS has announced the European Commission has not opposed the British government plans to allow remote island wind projects to apply for a Contract for Difference (CfD) in the next auction for less established renewable technologies in 2019.
Mr Jones said: "The key to enabling the Swansea Bay project to proceed lies, of course, with the UK Government agreeing an appropriate contract for difference arrangement.
UKPRwire, Wed Apr 26 2017] Hedgestone Group brings the Contract for Difference to online traders.
The Contract for Difference, or CFD, is one tool Hedgestone uses to bring the markets within reach.
A so-called contract for difference was signed in London by Business Secretary Greg Clark, Jean-Bernard Levy, chairman of French energy giant EDF, and He Yu, chairman of Chinese firm CGN which has a third stake in the scheme.
In finance, a contract for difference (CFD) is a contract between two parties, typically described as "buyer" and "seller", stipulating that the seller will pay to the buyer the difference between the current value of an asset and its value at contract time (If the difference is negative, then the buyer pays instead to the seller).
The court was also told the Co Fermanagh businessman had become "enamoured" with Contract for Difference, which was compared in court to betting on a horse.
The firm's UK subsidiary, Forex Capital Markets Ltd, offers Contract for Difference products with no re-quote trading and allows clients to trade oil, gold, silver and stock indices along with FX on one platform.
Trading in financial instruments (equity index futures and options, domestic and overseas commodity futures, contract for difference (CFD), etc.
It provides access to about 20,000 financial instruments such as stocks of companies trading on more than 30 global exchanges, 160 currency pairs, 8,300 contract for difference (CFDs), 1,500 exchange-traded funds (ETFs) and exchange-traded commodities (ETCs).
At the same time Paul Davidson 'the plumber' is appealing against a verdict arising from the opposite - failing to go public about a spread bet, much the same thing as a contract for difference.
Clients of iFOREX can now access this pair as a Contract for Difference, alongside other tradable CFDs such as the Dow Jones, CAC 40 and DAX 30.

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