CFD Market Makers vs. Providers

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dmorris

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Hi all,

I'm just getting started and I'm unsure whether to go for SBs or CFDs. I plan to deal in UK stocks.

From what I can see so far, though, I like the idea of trading at the "true" market price of a stock. I don't like the idea of a SB broker spreading the price to account for 3M interest, etc.

So, could anybody tell me which brokers are providers of CFDs (and so use the market-price) as opposed to "market-makers" (and so use a spread)?

Or have I understood this incorrectly?

My front-runner is currently IGMarkets; they have have good coverage of UK stocks (~900 stocks, >£10m marcap.) Although really, I want maximum possible coverage on UK stocks, so if there's any better broker in that respect, I'd love to know.

What I don't yet understand is if their CFD quoted prices will be the same as the live market price... I'm keen to avoid any problems with brokers altering their spreads while my positions are open.

Thanks,
D.
 
GNI is the best as far I am concerned for CFDs but not for beginners, you are not given a different or delayed price.
You only pay interest for longs (unless special borrow)
Excellent support

I would suggest you look at the numerous threads on T2W re CFDs and spreadbetting
 
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SB seems to be a good place for starting out trading (Capital Spreads in my opinion are the best of the bunch) and having a look at the different vechicles that one can trade. Don't waste your time on CFDs. They look attractive because of the leverage but the reality is grim. "Cash prices" suddenly seem to disappear when you most need them and the finance charges are lethal. A few posts on the elitetrader site echo my sentiments
http://www.elitetrader.com/vb/showthread.php?s=&postid=725765&highlight=CFDs#post725765
If you haven't got the funds to day trade US then perhaps have a look at FOREX. There are lots of good pointers on this site. Good luck!
 
Hi DMorris
One aspect you might want to watch out for is expenses. Most CFD brokers have a two commission rates: headline and negotiated. You can negotiate a discounted commission rate if you can convince them that (a) you are a serious, well-capitalised trader (b) you are a frequent trader. Do some hard haggling. They need your business just as you need their service.

I am not sure if you can haggle about the interest rate (I am not a CFD trader myself, not yet).

Good luck.
 
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One more thing:
If you are a position trader of stocks, I don't think US markets can be beaten. CFD expenses are atrocious compared to US broker commissions. US stocks spreads are also very, very low. Britain is just way too costly...

They are essentially the same products: you trade stocks on margin, pay interest if long and earn if short. So I can't really see why a position trader might prefer UK CFDs over US direct access trading.

Edit: Just remembered: NASDAQ doesn't officially support stop orders, which is a BIG disadvantage for position traders compared to the LSE.

Edit 2: Here is an interesting discussion on trading US stocks via direct access US brokers vs. CFD.
http://www.trade2win.com/boards/showpost.php?p=200941&postcount=203
 
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Was reading the GNI brochure and noticed that there is a charge for their trading platform. Nothing wrong with that because it's a DA platform, quite sophisticated. However the cost of that is negotiable as well !!

Honestly, is there no fixed cost in the CFD world? What do they achieve by making everything so opaque? Or do they hope the majority will never haggle and will pay the headline rates? All this achieves is to push people like me further away from CFDs, towards vehicles like SB. I don't know about you, but I don't like to haggle, I don't like complications, I just want to trade.

May be that is the intention, may be they don't want too many customers. I don't know.
 
haggling prices??

the only way to negotiate rates is through an introducing broker. They won't even talk to you otherwise.
 
OpenMind, you don't like to haggle?

Don't you ever go into a shop and ask for money off? I always do unless it is something like going to the supermarket and then I will look at the price of everything.
Haggling is trading, trading is haggling, no difference

mute peru, introducing broker? More cost? Hmm, don't think so, not for me.
 
Racer said:
OpenMind, you don't like to haggle?.
Click to expand...
Nope.

Racer said:
Don't you ever go into a shop and ask for money off?
Click to expand...
Nope.

It's just not something I am good at, therefore I buy a) at prices I am comfortable with b) from places where I don't feel I have to haggle. I do most of my major shopping either at cut price places or during sales.

We are going slightly off-topic now, discussing my shopping habits in intimate detail.
 
Sorry guys but I am also new to the CFD Market, can anyone recommend any reputable Advisory Trading firm for CFD or even Standard SahreTrading? I kinda want some one to hold my hand to start off with

Thank You
 
Direct Access

I've placed several trades via direct access on my E*Trade platform, I can see the limit orders appearing in the order book - is there a difference between the order book for CFD's to the one for equities? Or are they the same?

Thanks in advance
 
Mahdi said:
Sorry guys but I am also new to the CFD Market, can anyone recommend any reputable Advisory Trading firm for CFD or even Standard SahreTrading? I kinda want some one to hold my hand to start off with

Thank You
Click to expand...

Sorry to be cynical but 90% of the firms would love to 'hold you hand' while of course legally picking your pockets as well. There's a very slim chance you'll make any money.

Trade SBs at 50p a point, then when you understand how things work move to CFDs. Bottom line, rely on yourself to make money in the markets and not others, especially those in the square mile.........
 
GNI give good support but I wouldn't suggest opening a CFD account unless you were really happy with the idea of margin trading, you can get into trouble very quickly if you don't know what you are doing
 
FWIW I use VIA Broker, the new service which came out recently. No one appears to have reviewed it anywhere on these boards, so I'll do it here. To set this in context, I use it to trade NASDAQ stocks intraday. So for me the financing issues do not come into question.

Positives:

1) Staff are very friendly and helpful and go out of their way to sort things out for you.
2) Using the direct access platform, you can trade inside the spread, thereby working the spread rather than paying it!- fills aren't instant in this case, but worthwhile doing as someone will very often fill or prtially fill your order- but this is the same using any other DA provider
3) Fills of limit orders are very often instant unless trading in illiquid markets
4) You are trading in the real maket rather than a "provider" market
5) All mistakes made to date have been my fault and not the broker's!
6) You only need £2k to open an account (compared with $25k for a daytrading account with someone such as IB)

Areas for potential improvement

1) Level 2 screen inferior to esignal's (which is itself inferior to DirectAccessElite's L2 direct access platform - probably the best on the market)
2) Running the platform with esignal slows the platform down particularly in busy times eg the 1st half hour even on 2MB broadband. This makes running watchlists not worthwhile (in my case) which is a pity as this makes order entry far easier: 1 double click vs several clicks and stock symbol entry
3) Commission costs cf normal DA providers (eg IB). Commission costs are a real issue if trading small lots with the fixed minimum of $12 each way being in effect. The table below shows the positive (in your favour) movement required (with exit of course) for you to break even. From this you can see that you need to be trading a minimum of 400 shares to optimise your commission costs when compared to the $ move required to break even. When compared to IB's commission costs, this isn't competitive, for US day trading, but you need a minimum of $25k to get started.

So you take your pick. Do you have $25k? If you do use IB or some similar operation. Can you do an average positive trade of 24c to cover your commission costs on trading 100 share lots?

So the conundrum is still: how can you cost effectively day trade the US markets with less than at least $25k (preferably $30k) start up capital?

On balance though, in my experience, this is the best of the CFD bunch... unless of course, anyone knows otherwise ;)
 

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Jimmi1jag

To clarify your point about our =>$25,000 minimum deposit requirement to pattern day trade, YES we do require it for our clients. Because it is a US Regulatory requirement which we are bound to observe considering we are a US Regulated company.

The =>$25,000 minimum deposit to pattern day trade is only applicable for secuties and options on securities.

We agree with your premise that end clients should compare and make the best choice for their needs.

Have a nice weekend
Interactive Brokers


jimmy1jag said:
FWIW I use VIA Broker, the new service which came out recently. No one appears to have reviewed it anywhere on these boards, so I'll do it here. To set this in context, I use it to trade NASDAQ stocks intraday. So for me the financing issues do not come into question.

Positives:

1) Staff are very friendly and helpful and go out of their way to sort things out for you.
2) Using the direct access platform, you can trade inside the spread, thereby working the spread rather than paying it!- fills aren't instant in this case, but worthwhile doing as someone will very often fill or prtially fill your order- but this is the same using any other DA provider
3) Fills of limit orders are very often instant unless trading in illiquid markets
4) You are trading in the real maket rather than a "provider" market
5) All mistakes made to date have been my fault and not the broker's!
6) You only need £2k to open an account (compared with $25k for a daytrading account with someone such as IB)

Areas for potential improvement

1) Level 2 screen inferior to esignal's (which is itself inferior to DirectAccessElite's L2 direct access platform - probably the best on the market)
2) Running the platform with esignal slows the platform down particularly in busy times eg the 1st half hour even on 2MB broadband. This makes running watchlists not worthwhile (in my case) which is a pity as this makes order entry far easier: 1 double click vs several clicks and stock symbol entry
3) Commission costs cf normal DA providers (eg IB). Commission costs are a real issue if trading small lots with the fixed minimum of $12 each way being in effect. The table below shows the positive (in your favour) movement required (with exit of course) for you to break even. From this you can see that you need to be trading a minimum of 400 shares to optimise your commission costs when compared to the $ move required to break even. When compared to IB's commission costs, this isn't competitive, for US day trading, but you need a minimum of $25k to get started.

So you take your pick. Do you have $25k? If you do use IB or some similar operation. Can you do an average positive trade of 24c to cover your commission costs on trading 100 share lots?

So the conundrum is still: how can you cost effectively day trade the US markets with less than at least $25k (preferably $30k) start up capital?

On balance though, in my experience, this is the best of the CFD bunch... unless of course, anyone knows otherwise ;)
Click to expand...
 
Interactive Brokers said:
Jimmi1jag

To clarify your point about our =>$25,000 minimum deposit requirement to pattern day trade, YES we do require it for our clients. Because it is a US Regulatory requirement which we are bound to observe considering we are a US Regulated company.

The =>$25,000 minimum deposit to pattern day trade is only applicable for secuties and options.

We agree with your premise that end clients should compare and make the best choice for their needs.

Have a nice weekend
Interactive Brokers
Click to expand...

Thank you. It's a pain in the butt, but that's the way it is (for what I trade i.e. NASDAQ stocks).
 
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