Take care and you have been warned !!!
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some one in this forum wrote:what is the difference between cash (shorting) and CFD shorting?
I just spoke to my broker and they say that the SGX ruling only applies to cash (shorting). CFD... short ...as per normal.
cash shorting, in this case, is taking a Short position on an exchange traded underlying, such as Stock.
CFD is offered by a Market Maker, like Saxo Capitals, that emulate the exchange pricings of those underlyings they offer to their clients...so, u see Cosco in Saxo's screen and you see the bid and ask...these bid and ask is technically NOT the real bad/ask that is floating at the SGX...saxo, picks up these quotes, run thru their system and flash out their own COSCO quote, which is almost very similar and most times, similar to the SGX quotes. Why do they do this? bcos, they are the HOUSE....they take opposite sides to every of your bet, u enter buy order and it gets done, it is SAXO that sold u, not another trader somewhere else. CFD is therefore possible in this case. SGX cannot offer CFD becos they are NOT the house, they dont accept your bets, they are only an exchange, an intermediary. they earn from exchange fees from retailers and brokerages who pay to subscribe to SGX trading system.
CFD is Contract For Difference, which means, it is an undertaking to pay or receive a Difference in Pricing of the underlying you contract to buy or sell. Becos CFD do not require one to pay the full amount of the underlying during purchase, it is a LEVERAGE tool. Eg, COSCO @ $2, Long 1 lot will cost $2000 at any brokerage in singapore, unless they extend you margin account. Long 1 lot of COSCO CFD at $2, will cost you significantly lesser. Perhaps only 10%, such that you pay only $200 instead. This is 10 times leverage. One prospers and dies with leverage. Very sharp sword, i wont ever play with CFD. CFD is tempting only becos of the very high leverage it offers that normal brokerages do not. It is also a tool to guarantee poverty and even bankruptcy...pls dont try it.
Now, if you Short a stock from SGX thru your ordinary broker, you need to marginalize it, at a certain % of the price of that stock. Short 1 lot Cosco at $2, may require $1000 (50% margin), pay borrowing fees, subject to paying dividend pay out...
BUT with CFD.... no worries about such a high margin...maybe 10% instead of 50%, no need to pay for borrowing...(heck, they pay you instead to Short bcos you receive "financial" interests), no need to pay any dividend (becos, CFD does not deal with REAL stocks; CDP will NEVER register any of your CFD trades; it's monopoly script created by the CFD HOUSE, as i have explained)...
anyways....very long and loh soh....knn...
DONT PLAY CFD...in short or Long!!!!!