A contract-for-difference is the exchange of a fixed price asset for a floating price asset. In foreign exchange markets the term is used to describe the settlement of the difference between a contract rate and the eventual settlement rate. Contracts for difference (CFDs), are an equity derivative that give a trader the ability to trade a vast range of financial instruments, including shares, indices, commodities and currencies across international markets. CFDs do not grant ownership of the underlying asset, just access to the price performance.
CFDs allow traders to use leveraging to make a profit and to sell short as well as go long.
CFDs are currently available in listed and/or over the-counter markets in United Kingdom, New Zealand, Germany, Switzerland, Italy, Singapore, South Africa, Australia and Hong Kong. CFDs are sometimes called Turbo Certificates or Waves. In Hong Kong, they are referred as Callable Bull/Bear Contracts.
- Contract for Difference. Reuters.