How CFDs work

• What are CFDs?
• Why trade CFDs?
• Our CFD account
• How CFDs work

Trading Contracts for Difference

Trading CFDs is similar to trading equities. When opening a position you will be quoted a bid and an offer price. You will then be asked how many CFDs you would like to trade and whether you would like to trade long or short. On opening and closing a position you will be charged a commission.

However unlike equities, Contracts for Difference do not currently attract UK stamp duty* since you do not physically own the underlying equity but rather a derivative that moves in line with underlying investment(s).

Contracts for Difference differ from equity trading in that when opening a position you are not required to pay for the full value of the trade but rather you are required to deposit the Margin Requirement.

Margin Requirement is the amount you must deposit to place a trade. In order to place a trade you must have enough Net Equity (cash and unrealised profit) to cover the Margin Requirement for that trade. For details on Margin Requirements for particular Markets, click the relevant Market Information tab, which is located on the Trading Platform next to each Market or by calling our Customer Services Team.

* Tax laws may change and depend on your individual circumstances.

Financing

Financing is charged on all open positions held overnight except FX CFDs. For long positions your account will be debited the financing fee, whereas with short positions you will receive the financing fee (subject to interest rate levels). This is only paid when a position is held overnight and paid to your account daily.

Financing is charged on the unmargined value of your trade and is calculated based on calendar days which include weekends and bank holidays.

Dividend Adjustments (equity and equity related CFDs)

A dividend adjustment is credited to long positions and debited from short positions held at the close of business on the day before the ex-dividend date. Payment is credited or debited to your account on the ex-dividend date net of relevant taxes.

Corporate Actions (equity and equity related CFDs)

Contracts For Difference positions will be adjusted in the event of a Corporate Action (for example a rights issue). The adjustment will be to replicate the Corporate Action on the underlying equity. If this is not possible then
TD Waterhouse CFDs may, at its discretion, make an equivalent cash adjustment. This will apply to positions held at the close of business on the preceding business day to the ex-Corporate Action date.

However, Corporate Actions do not show how to fund any running/open losses. It is important that you understand that in addition to your Margin Requirement, you will have to fund your account if your open trade is showing a loss.

TD Waterhouse CFDs is a trading name of City Index Limited (CI), who is a provider of contracts for difference (CFD) trading and whose head and registered office is City Index, Park House, 16 Finsbury Circus, London EC2M 7EB. For the purposes of CFD any contract is between you and CI and all dealing, administration and settlement is carried out by them and TD Waterhouse Investor Services (Europe) Limited are not responsible for any of the functions they perform. Your account is held with City Index Limited (CI), which is authorised and regulated by The Financial Services Authority (FSA Registered Number: 113942).