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 the CFD was purchased to when it was sold. CFDs are common in both Australia and also the UK, they are mostly offered over indices, stocks and forex. 

In the early days in the UK where CFDs started out they were commonly called SWAP contracts. It wasn’t until around 2001 that CFDs grew to become popular with retail investors. It was CMC Markets and IG Markets, two large spread betting companies based in London that bought CFDs to the forefront in the retail investors arsenal.  CFDs rapidly grew to be well-liked in the United kingdom as they did not attract any stamp duty. 

In 2002 both CMC Markets and IG Markets opened offices in Australia and began to actively market CFDs to Australian traders, the popularity of CFDs peaked in 2007. Because of their popularity amongst Australian traders and investors many overseas CFD providers saw the potential in Australia and opened up offices. There are over 13 CFD providers operating in Australia and an estimated 35,000 retail CFD traders.

In recent times CFDs have received a great deal of negative publicity because of traders incurring losses caused by overexposing themselves to the market during volatility. This combined with the recent failure of CFD provider Sonray Capital Markets has led to increased scrutiny from the Australian financial Services Regulator ASIC relating to how CFD providers handle client money. 

At present CFDs continue to be by far the most widespread financial product for retail traders in Australia, although unconfirmed it’s estimated that CFD volumes account for around 35% of ASX exchange turnover. As CFDs are an over the counter product it’s difficult to verify this figure.

CFDs in Australia are mostly traded online through a selection of proprietary CFD trading platforms offered by the major companies. Many of these platforms were originally developed for forex CFD trading however due to the similarities between share CFDs and forex CFDs the platforms have be adapted to suit share CFD traders. 

As Australia has the largest percentage of share ownership in the world on a per capita basis it is not unexpected that almost all CFD traders have experience buying and selling stocks online. The historical growth of the Australian share market has made share and CFD trading a prevalent pass-time for Australians. 

Before you run out and join the 35,000 %link1% traders in Australia you must make sure that you are completely aware of the risks involved in CFD trading. Like all leveraged financial product %link2% offer considerable rewards however these don’t come without risk. You should make sure that before you jump into %link3% you read the Product Disclosure Statement (PDS) available from your CFD provider which outlines the negative aspects and benefits of trading CFDs.