Contracts For Difference

What are CFDs

CFDs or Contracts for Difference are an agreement between two parties to exchange, at the close of the contract, the difference between the opening price and closing price of the contract, multiplied by the number of underlying stocks specified in the contract.

For CFDs on listed securities, they are traded in a similar way and can be used as an alternative instrument instead of trading on the underlying. It allows clients to gain exposure to stock price movements, without the need for ownership of the underlying stocks.

We also offer CFDs on Index, so you can have the flexibility of trading these instruments on the same CFD platform without the need to log in to another system or to maintain a separate cash balance.

You will be able to take long or short positions on CFDs without paying the full contract value of the underlying position. You are only required to place a cash deposit (known as initial margin) as collateral.
CFDs do not have an expiry date and you will be able to hold the position indefinitely as long as you are able to meet your margin and interest requirements.

Features & Benefits

Flexibility to Short

One of the main appeals of CFD trading is that you can short sell without owning the underlying stock. When you invest in a stock via a CFD on the CGS International Futures CFD Trading System, you can open a short position on the spot at the real-time tradable price by selling with the aim of profiting from the falling stock price.
Leverage

CFDs are traded on margin, using leverage to maximise your trading capital. This means for a small outlay you can open larger positions in the market compared to that of traditional stock trading.
No Expiry Date of Contracts

Gives you the freedom to roll over your open positions on a daily basis until you choose to close the position.
Transparent Pricing

Our Direct Market Access system gives you the same transparent pricing and liquidity as stock trading.
Ease of Trading

There is more than one mode of trading CFDs - through broker or online. The online system for CFD trading includes features like good-for-the-day orders, real-time portfolio and daily account management.
Corporate Action

As an owner of an Equity CFD, you will have your account adjusted to reflect cash dividends credited or debited on the underlying stock and to participate in stock splits, just as you would if you owned the physical stock. The only difference is that with a CFD you are not entitled to any voting rights.

Sophisticated Investors

Currently, CFD can only be traded by sophisticated investors (i.e. any person who falls within any of the categories of investors set out in Part 1 of Schedule 6 and 7 of the Capital Markets and Services Act 2007).

CFD is a complex leveraged product and you are advised to fully understand the risks associated with CFD before trading them.

What is Direct Market Access?

Direct Market Access (DMA), is the electronic facility that allows for CFD prices and liquidity to be identical to the underlying stock markets. Investors enter into CFDs at the underlying market price. This means that all orders are executed in real time and the investors can be assured of true market prices.

DMA also has the added benefit of offering the ability to participate in the pre-opening and pre-closing phase of the market, which is often the most liquid and volatile period of the trading day. CGS International Futures adopts the DMA model for CFD as it offers one of the most transparent pricing structures to investors.

DMA CFD provider model allows:

No additional spreads
Straight through processing
Potential to be a price taker or maker
Participation in pre-opening and pre-closing phase

Participation in pre-opening and pre-closing phase

May not always have the same prices as the exchange
There is potential for additional spreads and potential requotes
Market makers are price takers only, generally there is no participation in pre-opening and pre-closing phase

Comparison of CFDs against Traditional Stock Trading

CFD is traded on margin, using leverage to maximize your trading capital. This means that you can undertake a larger position for the same amount of capital as compared to traditional stock trading. The effect of leverage means that movements in the underlying market have a magnified effect and can result in greater profit or loss as illustrated below:-

Example 1: A Profit-Making Trade

	CFD Trading	Traditional Stock Trading
	Buy 1,000 XYZ CFD @ $10	Buy 1,000 XYZ Shares @ $10
Initial Outlay	($1,000) Upfront payment of 10% Margin is required	($10,000) Payment by settlement date is required
Contract Value	$10,000	$10,000
Commission @ 0.25%	($25)	($25)
	Sell 1,000 XYZ CFD @ $11	Sell 1,000 XYZ Shares @ $11
Contract Value	$11,000	$11,000
Gross Profit/(Loss)	$1,000	$1,000
Commission @ 0.25%	($27.50)	($27.50)
Financing Cost *	($5.48)	-
Net Profit/(Loss)	($1,000 - $25 - $27.50 - $5.48) = $942.02	($1,000 - $25 - $27.50) = $947.50
Return on Initial Outlay	$942.02 / $1,000 = 94.20%	$947.5 / $10,000 = 9.48%

Example 2: A Break-Even Trade

	CFD Trading	Traditional Stock Trading
	Buy 1,000 XYZ CFD @ $10	Buy 1,000 XYZ shares @ $10
Initial Outlay	($1,000) Upfront payment of 10% Margin is required	($10,000) Payment by settlement date is required
Contract Value	$10,000	$10,000
Commission @ 0.25%	($25)	($25)
	Sell 1,000 XYZ CFD @ $10	Sell 1,000 XYZ shares @ $10
Contract Value	$10,000	$10,000
Gross Profit/(Loss)	-	-
Commission @ 0.25%	($25)	($25)
Financing Cost *	($5.48)	-
Net Profit/(Loss)	($0 - $25 - $25 - S5.48) = ($55.48)	($0 - $25 - $25) = ($50)
Return on Initial Outlay	($55.48) / $1,000 = (5.548%)	($50) / $10,000 = (0.5%)

Example 3: A Loss-Making Trade

	CFD Trading	Traditional Stock Trading
	Buy 1,000 XYZ CFD @ $10	Buy 1,000 XYZ shares @ $10
Initial Outlay	($1,000) Upfront payment of 10% Margin is required	($10,000) Payment by settlement date is required
Contract Value	$10,000	$10,000
Commission @ 0.25%	($25)	($25)
	Sell 1,000 XYZ CFD @ $9	Sell 1,000 XYZ shares @ $9
Contract Value	$9,000	$9,000
Gross Profit/(Loss)	($1,000)	($1,000)
Commission @ 0.25%	($22.5)	($22.5)
Financing Cost *	($5.48)	-
Net Profit/(Loss)	(-$1,000 - $25 - $22.50 - $5.48) = ($1,052.98)	(-$1,000 - $25 - $22.50) = ($1,047.50)
Return on Initial Outlay	($1,052.98) / $1,000 = (-105.30%)	($1,047.50) / $10,000 = (-10.48%)

Important Note:

The above illustrations assume the trade takes place on Friday and the subsequent sale takes place on the following Wednesday. Position is held for 5 days. Financing cost is determined at the CGS International Futures Base Rate (“CBR”) plus 3.75% for long positions, and minus 3.75% for short positions. This example uses an effective financing rate of 4% per year / 365 days and assumes no change in valuation price on Monday and Tuesday. CBR is subject to change as it relates to the interbank quoted rate.
The risk of loss in CFD trading can be substantial and you may lose more than your initial investment. CFD investors are not the actual owners of the underlying instrument itself and do not have any rights over the underlying instrument.

CFD List

Get the comprehensive list of counters and their useful related information from the following links*

* CFD lists are indicative only. For the up-to-date list, please login to our platform and refer to the margin table.

Commission & Financing Rates

Commission is charged on each CFD trade and is calculated as a percentage of the full contract value of the underlying stock that is bought or sold. Financing is charged daily on any CFD position held overnight.

Click HERE for Commission, Financing and Market Data Charges

You may contact us at (603) 2635 8908 / (603) 2635 9777 or email us at futuresbroking.my@cgsi.com

For more information, please refer to the below link.

Corporate Website
Product Highlights Sheet
Disclosure Document

Contracts For Difference

What are CFDs

Features & Benefits

Flexibility to Short

Leverage

No Expiry Date of Contracts

Transparent Pricing

Ease of Trading

Corporate Action