Contracts for Difference (CFDs)

Non-US and non-Canadian1 residents enjoy electronic access to IB CFDs,
OTC products that let you trade the difference between the current and future price of a share or an index.

CFDs

IB Share CFDs2

In addition to the potential tax benefits, trading CFDs at IB offers the following benefits:
  • Transparent, Low Commissions and Financing Rates - The starting commission rate is only 0.05% on all share CFDs, with lower rates available for active traders. Overnight financing rates start at only 1.5%, also with lower rates available for larger balances. We challenge you to find a better offering.

    For more information, see our CFDs Commissions page.

  • Trade CFDs Alongside the Underlying Shares - Our Universal account lets you view and trade multiple asset types from the same screen. View the CFD ticker on one line and the underlying share ticker on the next. Trader Workstation, our desktop trading platform, supports stocks, options, futures, forex, CFDs, metals, bonds and funds all from the same account statement and same trading window.

IB Share CFDs Details & QA

  • Margin Efficiency - CFD margin requirements are generally more favorable than stock margin requirements, and under no circumstances will they be worse. This is true for both Reg T and Portfolio Margin accounts.
  • Efficient CFD Reference Pricing - The IB CFD price reflects the exchange-quoted price for the underlying share. IB uses its efficient Smart Routing technology to determine your CFD reference price. With other brokers, you run the risk of not getting the best possible price.

    Our clients have the ability to add quotes to the exchange book in the same way they would trading stocks. This is possible because IB will match all CFD orders immediately with a hedge-order. As a result a non-marketable CFD order will create a matching non-marketable order for the underlying share on the exchange.


IB Index CFDs3

IB Index CFDs present an opportunity to gain broad market exposure more easily than with many other instruments. IB Index CFDs also offer these important benefits:
  • Flexible Exposure to Global Markets - IB Index CFDs can be traded in lots as small as 1X the index level. Unlike the related futures, IB Index CFDs do not expire, saving rollover related costs and risks.
  • Low Commissions and Financing Rates - Depending on the index, commission rates are only 0.005% - 0.01%. Overnight financing rates are just benchmark +/-1.5%.
  • Transparent Quotes - Unlike other Index CFD providers, IB charges a transparent commission. We don't widen the spread of the related future like some other brokers. The IB Index CFD quotes accurately represent the spreads and price movements of the related future*, and there are no requotes. What you see is what you get.
  • Margin Efficiency - IB Index CFDs are margined at the same low rates as the related future, adjusted for contract size.

*IB hedges all index CFD trades, and does not operate a dealing desk. Fills cannot be guaranteed in extreme markets.


IB Index CFDs Details & QA



CFD Facts

  • CFD trading may provide you with many of the economic benefits of owning or shorting the underlying shares or index. A Share CFD attempts to mirror stock benefits, including market movements, dividend income and corporate actions, except in cases where withholding rules for foreign investors affect dividends, and where a corporate action involves voting tenders. In certain jurisdictions, Share CFDs may provide the benefit of not being subject to stamp duty, with other potential tax benefits. Please consult your tax specialist for specific tax advice.
  • Share CFDs also offer all the benefits of derivatives trading, including leverage and the ability to easily go long or short, without many of the drawbacks of traditional derivatives. Specifically, Share CFDs do not expire, and are not subject to rollovers and price decay.
  • Financing of a CFD transaction is similar to financing a stock transaction, where you pay interest on your net borrowings. With a CFD, you pay and receive interest on the value of the underlying, and earn interest on your margin (collateral) balance.


Share CFD Example

In this example, the underlying is trading at 9.98 – 10.00, and the CFD reference price reflects the price of the underlying. You purchase 30,000 CFDs at 10.00 for 300,000, which you then hold for 30 days.
Assumptions
Underlying Price 9.98 - 10.00
CFD Reference Price 9.98 - 10.00
Action Buy
Quantity 30,000
Term 30 days
Trade Value 300,000
Margin (10% x 300,000) 30,000
Interest Charged (on 300,000 over 30 days)
Tier I 70,000 2.58% 148.44
Tier II 230,000 1.56% 294.53
Total Interest Charged 442.96
Interest Paid on Cash Balance (of 30,000 over 30 days)
Tier I 7,000 0.00% 0.00
Tier II 23,000 0.06% 1.10
Total Interest Paid 1.10
Net Financing Cost 441.87

For more information about CFDs, see "Overview of IB issued CFDs" in our Knowledgebase.



Risk Warnings

  • CFD Trading is not suitable for all investors. Due to the leveraged nature of CFDs, trading these products may expose clients to losses which may exceed their initial investment.
  • Your CFD agreement is with Interactive Brokers (U.K.) Limited, which is authorized and regulated by the Financial Services Authority ("FSA"), register number 208159.
Disclosures
  1. IB CFD trading is available to non-US and non-Canadian legal residents, excluding residents of Australia and Hong Kong.
  2. Eligible customers must apply for CFD trading permissions in Account Management, and ensure that they have a market data subscription for the listing exchange of the underlying share they wish to trade as a CFD.
  3. For Index CFDs, clients must have a market data subscription for Index CFDs, which is a free subscription.