What You Can Invest In
Listed CFDs
What are Listed CFDs?
Listed Contracts for Difference (Listed CFDs) are powerful investment tools for UK investors. They combine the flexibility of a CFD contract with the price transparency of a London Stock Exchange listing. Most importantly, Listed CFDs are much lower risk products than traditional CFDs - each Listed CFD contract embeds a guaranteed stop-loss at no extra cost, which puts you fully in control of your maximum possible loss at all times. This means that with a Listed CFD you can never lose more than your initial margin payment, no matter how badly the market moves against you or the length of time it is held.
How do they work?
- Leverage
Listed CFDS work in a similar way to unlisted CFDs. In order to gain exposure to a given asset such as a share or index, an investor is only required to put up a margin (typically between 5% and 15%) for the amount they wish to control. Once an investor holds the CFD for each 1 pence movement in the underlying security the Listed CFD will move 1 pence. Therefore the investor is enjoying the full exposure to the underlying security movements at a fraction of the cost. - Financing and Dividends
When you are holding a long CFD you are purchasing shares on margin and incur a financing fee on the amount you borrow. For unlisted CFDs this fee is charged to your account on a daily basis, which makesit difficult to identify the true cost of the trade when opening the position. For Listed CFDs, however, all financing fees and dividends are included on the initial price. The value of a long Listed CFD is reduced by a fixed amount overnight to reflect the daily financing fee, with no additional payments required. Similarly, any financing fees you are due to receive from a short position or dividend payments you are due to make, are factored into the price of the Listed CFD at its issue. This enables Listed CFD investors to know the total cost of their investment upfront, whereas with CFDs unlisted the total cost of entering a CFD contract is not known and is not limited to the investors initial investment but is in fact unlimited. - Trade both Long and Short
A Listed CFD trader can make money in both a falling and rising market simply by trading either a long or short Listed CFD. - No Margin Calls
The provider of an unlisted CFD will require an investor to maintain the margin level throughout the life of the trade. This may require additional margin payments, which can often come at the most unwelcome time - when a trade is moving against you. With an Listed CFD there are no margin payments even if the trade moves against you. However if the stop loss level is hit the position is automatically closed out. - No Stamp Duty
There is no Stamp Duty to pay on Listed CFDs as you are buying a derivative and not the physical underlying security.
Advantages of trading Listed CFDs
Trading example: going long and going short
Which accounts can I trade in Listed CFDs?
You can invest in Listed CFDs through our Trading Plus or SIPP accounts. In order to upgrade please complete the Upgrade Form including section 4 entitled Warrant and Derivatives.
How risky are they?
Listed CFDs are not suitable for all investors. You should not deal in Listed CFDs unless you understand their nature and the extent of your exposure to risk. While your maximum loss is limited to the initial margin payment you make, you should not open a Listed CFD position unless you are prepared to lose the entire margin payment plus any commission charges incurred. You should be satisfied that they are suitable for you in the light of your circumstances and financial position. If you are in any doubt you should consult an appropriately qualified financial advisor.
Download more information about Listed CFDs and the risks involved.