No, you are the only one who does not understand (once again) the thread topic: The issue is on a proposed transaction tax on equity trades in the US. And then it got off track into CFDs, so where did you pull out of your ass that anything in this thread is limited to a discussion in Europe? Living in Asia and still suffering from a European superiority complex?
yes, with 11 likes and 9000 posts I see how most would agree with your assessment. You talk shit and cannot back up any of your stupor thats why I put you on ignore . No need to reply as I won't see your reply anymore, unless of course you want to entertain your 11 followers. thanks for making my point. you can't do the numbers. therefore you sink to calling me names.[/QUOTE]
Just so that we still stick to facts rather than anecdotes, anyone who is interested in the actual facts and truth of CFD pricing is recommended to read the following (or similar) papers: http://kevindavis.com.au/secondpages/workinprogress/CFDs-final-Nov29-09_2.pdf Particularly the following passage on page 20 and following applies: "4.3.1 CFD spreads and the spreads on the underlying Because DPMs are rebated the OIC and face very low trading costs, the zero profit spread from market making activities resulting from competition should, in the absence of hedging risks, be not much wider than those in the underlying market. However, for customers, there is a potentially much wider spread which is consistent with them being willing to take positions in the CFD rather than in the underlying using margin loans, short selling, or trading the physical. This arises because the effective interest cost on long CFD positions is lower than that associated with margin loan purchases and the interest return is higher than on investing proceeds from short positions in the physical. Incorporating the Open Interest Charge on positions levied by the ASX of 1.50% p.a., the effective interest cost (return) on CFD positions is r +0.015 or r -0.015 p.a., where r is the RBA target cash rate. Over the period of our study, the indicator margin lending rate averaged 3.4% higher than the RBA cash rate. The interest paid on bank cash management accounts (in excess of $50,000), which would be an upper bound on returns paid by brokers to retail clients on cash generated from short sales, was 1.1% lower than the RBA cash rate." --> Essentially the point is that CFDs are priced completely differently than their underlyings. The reasons for that are interest charges, different commission models and generally wider spreads than the underlying. Just because some DMA Brokers show identical prices and spreads between CFD and underlying cash equity means nothing (well, nothing other than that the CFD price and spread shown is actually showing the price and spread of the underlying), because the ensuing cash flows are entirely different. All it means to have identical prices shown at the outset is that the underlying economics are mimicked by the CFD. But still that does not lead to an identical pricing during the life time of the CFD by any means.
according to volpunter he has has friends in the hedge funds in hong kong who make 100 basis points per day and are glad to pay the stamp tax. I am going to give the answer to disapprove his assertion. if these so called "friends" were able to achieve this $1 at the beginning of the year at the end of the year they would have $3.48 assuming a .005 stamp tax. there are no such animals on the hedge fund level or on the retail level. my suggestion is to take any of volpunter's assertions with a grain of salt or better still still make it a full shaker if you like a lot of salt.
Why the emotionally charged comment? Direct market access CFD brokers route the order to the market (IB for example), it's part of the book. Auction orders get filled at exactly the same price as the underlying, not a penny different. I'm not saying IB isn't playing the usual games with orders (just like all brokers) but there is no huge difference for me when trading except I can't choose where it's routed. There is always spread but my argument was that it's exactly the same as trading the underlying.
I did not mean to come across as being emotional but what you said is simply wrong. Most CFDs trade at a bid-offer spread. Most also charge commission, they charge interest on a daily basis. So yes, while the initial quote in some CFDs (only DMA single stock CFDs) might be identical with the underlying nothing at all is identical when it comes to the pricing of the whole contract. You can't say just because the initial quote is identical that the pricing is identical, completely ignoring the ensuing cash flows such as interest charges. For all non DMA or non single stock CFDs even the initial quotes are not identical with the underlying for obvious reasons. Also consider that some non DMA brokers re-quote and even IB as DMA CFDs intermediary may delay execution for various reason and hence get you a worse price (at least a different price than anticipated). And no, it is NOT the exact same as trading the underlying, how can it be if the economic benefit is different? I do not understand your rational or maybe definition but clearly the two are not identical else you would not trade the CFD in the first place. The economic costs/benefits are NOT identical even for DMA exchange traded CFDs (interest charges alone and completely different financing structures demolish the equality ). Additionally, non-customary dividend payment structures or corporate actions in the underlying can sometimes not be replicated by the CFD.
US equity markets is certainly the place to be if you want to trade individual not just the top 25 stocks on a daily basis. key elements are liquidity (tight spreads) for 2nd rate and 3rd rate stocks. there is no uptick rule with exceptions and no FTT to bankrupt your capital + low .commission rates. anybody who tells you that the FTT will not eliminate the capital of stock traders is ignorant of the facts.
I can't speak on interest charges or anything of that sort, I can only comment on daytrading as that's that's what I do. There are benefits to CFDs such as lower margin requirements with most underlyings but oddly enough non-marginable underlyings actually have HIGHER margin requirements for equivalent CFDs. This is my sole reason to going with CFDs, I get to effectively have more leverage.
All fair points. I just wanted to correct the misperception that CFDs are equally priced than their underlying. But I do and always have seen the points made in favor for CFDs regarding leverage and other benefits.