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How CFDs Differ from Single Stock Futures

Article Quant Q&A · Author: Suminda Sirinath S. Dharmasena
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Summary

The document compares contracts for difference (CFDs) with single stock futures (SSFs). It notes that both account for interest and are settled daily, so their economics can appear similar at first glance. The central distinction is market structure: CFDs have traditionally been over-the-counter contracts, while SSFs are generally listed on exchanges.

The distinction is not absolute, since some CFDs are exchange-listed. Historically, OTC distribution made it easier to offer leveraged and customized exposures, including access to markets that exchanges might avoid for regulatory reasons. The example given is mainland Chinese A shares. The discussion is a brief conceptual comparison rather than a detailed analysis of pricing, margin, counterparty risk, or contract terms; these can vary by product and venue.

Key ideas

  • CFDs and SSFs can have similar interest treatment and daily settlement.
  • CFDs have traditionally traded over the counter, while SSFs are generally exchange-listed.
  • Some CFDs are listed, so the venue distinction is not universal.
  • OTC distribution has historically supported leveraged and customized exposures, including access to certain restricted markets.

Tags

EquitiesFuturesDerivatives pricing
Full text
# What are the differences between CFD and SSF?


# What are the differences between CFD and SSF?












What are the intricate differences between SSF and CFD?

The similarities are that both take into account interest and settled daily thus looks more or less the same pima facie.

## Answer by Matt Wolf (score 3, accepted)

https://quant.stackexchange.com/a/7997

The basic difference is that CFDs are over-the-counter products and SSF are exchange listed products.

This does not, however, hold entirely true anymore as some CFDs are listed (example, http://www.asx.com.au/products/asx-listed-cfds.htm ).

But the historical reason for CFD's origin was that over-the-counter products could provide more leverage and such products were easier to register and distribute and hence more exotic products could be created. Also, CFDs can take exposure to markets that exchanges would not touch (for regulatory reasons), such as the A-share listed Mainland Chinese markets.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.