Advantages of CFDs

By using CFDs you may be able to control up to 10 times the securities face value compared with an outright purchase. This higher gearing creates greater profits if you correctly anticipate movements in the share price. However the risk of loss also increases proportionately if the securities price moves against you.

You do not pay the full underlying value of a CFD trade. However, before you trade, you are required to deposit cash collateral, known as “initial margin”. Initial margin rates vary from share to share. These are calculated as a percentage of the overall value of the trade, starting from 10%. If all your trades were eligible for a 10% margin, then you could hold positions worth a total of $100,000 having deposited only $10,000. You would therefore gain ten times leverage on collateral provided. The full value of any running losses must be met daily. This may result in being called for additional funds to support a position. This is known as variation margin.

Every CFD in your account is revalued at the close of each business day. Any profits resulting from the revaluations are credited to your account. Losses are debited and any resulting margin calls are made.

Like the share market, you can participate in corporate actions and dividends on share CFDs. Holders of bought CFD positions receive the benefit of cash dividends. Conversely, holders of sold CFD positions must pay an amount equal to the value of any cash dividend.

You pay commission on each CFD trade. In addition you pay interest on the value of a long CFD position. When you hold a CFD position overnight, interest is charged. If you hold a short CFD position, MF Global Singapore pay you interest on the value of the sale the share would have generated. Typically this is paid at the MBR less 3% per annum. All costs are negotiable depending on volumes and frequency of trading.