I was considering using them for long term positions in US ETFs, but when I extrapolated the cost impacts from 5 days to 365, I realized they'd cost >30% per year to hold. Let me do a sanity check to prove my point. To eliminate the possibility of this being an issue with my account being euro denominated, let's considered those ETF domiciled in the EU. https://www.tradingview.com/symbols/XETR-SXR8/ According to TradingView this is the ETF with most assets under management in Germany at around 100B. For 20k euros, the Cost Impact says that the ongoing cost of holding the position for 5 days is 0.5%, which comes down to 36.5% per year, so it isn't an exaggeration at all. The IB CFD commissions page says they should only cost within 1.5% of the overnight rate, but this is clearly way above that, so I am wondering what the deal with CFDs is. https://www.interactivebrokers.ie/en/trading/ibkr-share-cfds.php For reference this is what the interest rates on CFDs should be.
Ok, I finally realized why the fees seem so high. It's basing them off the investment in base ccy rather than the order value. CFDs offer around 7.5:1 leverage, so I should be dividing the 36% by 7.5 in order to get the actual interest rate. And in fact, as an EU customer I seem to have access to that same kind of insane buying power even for regular stocks.
The CFD designers of course know that the US stock market has a long-term upward trend, for known reasons. As a result, if you use leverage, you'll always be charged on the borrowed money part (there are some rare exceptions in certain CFDs where there's a positive swap aka you get credited daily, the more the more borrowed money you use) on US stock indices and probably most other stockindex cfds, too. Otherwise, the broker would lose in the long-term.
That makes it sound like it works as margin does with regular leveraged stock purchases, but the way I understand it, with CFDs I'd be charged the interest fees regardless of whether I have enough money in the account to cover the entire investment, right? Otherwise, why would the Cost Impact page show the financing cost? I understand that with CFDs I am trading against the broker, but nothing is stopping IB from hedging the position I opened.