CFD providers - a comparison
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     zorba
Member
Username: zorba
Post Number: 119
Registered: 12-2003Rating: N/A
Votes: 0
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| | Saturday, May 06, 2006 - 12:46 am: |  
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G'day All
First off - great win to the Australian rugby league side tonight.
Now, regards the ATO, I think you'll find that in any dispute the ATO doesn't have to prove that they are right or that you are wrong. YOU have to prove that you are RIGHT (fibo - correct me if I'm wrong - (if you are with the ATO)).
As the Irishman said, 'Anyone who's not confused here doesn't really understand what's going on'.
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orangeguy
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Username: orangeguy
Post Number: 58
Registered: 07-2004Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 01:02 am: |
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Its probably old news, but I just read the SFE is proposing to list CFDs by the 2nd quarter of 2007 on their exchange.
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ingot54
Member
Username: ingot54
Post Number: 1460
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 01:50 am: |
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http://www.asx.com.au/about/pdf/fact_sheet.pdf
It might become quite fashionable for the big end of town to trade CFD's on the SFE.
What does that mean for the underlying share prices?
What does that mean for the small CFD trader?
I don't see this as a good thing - with the smaller caps so open to manipulation, volatility will be the first thing to increase.
Pity we can't trust the watch-dog, ASIC to weed out the wheeler-dealers.
Don't believe in manipulation of the markets?
Have a look here, or do your own google search for more on this case.
Keep Smiling
Trading style :CFD's predominantly long term.
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orangeguy
Member
Username: orangeguy
Post Number: 59
Registered: 07-2004Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 10:33 am: |
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Ingot, sorry for the silly questions, but:
HOw would listing CFDs affect the CFDs of the providers such as CMC and IG? We will still be able to trade through our provider correct? And I would also assume that the CFDs we trade through our provider are not the same contracts as the ones being listed right? So if we keep trading through our provider then we would not be exposed to the manipulation that could happen on the SFE?
Thanks.
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ingot54
Member
Username: ingot54
Post Number: 1462
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 11:46 am: |
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Thanks for your question Orangeguy - no question is ever "silly".
My concerns with listing CFD's on such an institution as the SFE brings this derivative out of the cold, into the "respectable establishment".
First of all, CMC and IG Markets are not tarred with the same brush.
CMC is a Market Maker, and as such can "spike" you out of a position, even though the underlying price does not go anywhere near the price at which you were stopped-out.
This is in their "fine print" and is justified by how they view orders in the queue. They say that if they have the selling pressure, they can spike their data to reflect their orders, even though the underlying share price never meets that level. Is this what you want? (The question is rhetorical.)
IG markets use the underlying share price on which to base their CFD prices. They GUARANTEE to always match exactly the underlying. No spread, no re-quotes. Your order will be met at the price you state - providing the volume matches the real market.
The entry of SFE into listing this instrument will not affect the ability of the current providers to continue as usual ... though it might be good for competition, and see commissions improve.
Where I believe it will not be good, is in the way the smaller caps with smaller volumes traded, and lower share prices are sitting ducks for manipulation.
Consider just BPT (Beach Petroleum.)
Beach Petroleum closed on Friday at $1.55, with 1,421,768 shares traded. That's a turnover of just $2.2 million for the day. If you had a look at the Nomura case in my previous post, where they spent $600 million to "have a go" you can see where manipulation of BPT trading would be a cakewalk.
Imagine you take a short position on BPT as a CFD for "all the usual FA and TA reasons." When BPT is traded as a CFD on the SFE, much larger positions can be accommodated than can be now, with the current crop of providers.
If someone else took a very large, long position on BPT, on a margin of 5% with SFE, you can see how manipulation would boost their profits. All they would need to do is spend up big on the underlying equity, and for every ten cents the underlying rises, the CFD value rises by $2.00, on that 5% margin.
Nifty eh?
And suddenly your short position is looking very sick indeed. You would, more than ever, need to ensure your stops are in place for EVERY trade.
That's why having SFE involved is not a good thing. We are not talking $10,000 here. There are some incredible punters out there, or should I say "predators" with some very deep pockets, and very shallow ethics.
My concern is that the underlying share prices, on which the CFD is based, would no longer reflect true market supply and demand - at least to the extent it does now.
I can see that trading the bigger caps - ASX TOP 50 for example - might offer some immunity from this manipulation.
I hope this is just paranoia on my part.
Keep Smiling
Trading style :CFD's predominantly long term.
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dug
Member
Username: dug
Post Number: 1054
Registered: 07-2005
Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 02:10 pm: |
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So Ingot [u2 orangeguy]
It's a wrap then on d'Non-Tax line?Like SFE listing cfd's.
The Tax Office would have any dill goin' dMr Blank sayso?
on TOAST.
respectability has a price,palanquin.
Nothing is Impressionable
no matter what or who is laying it out[like an egg] on ya.
DIY R [research)
You bein'a Track boy,Ivan[like horses]may not be aware that a card school can set up anywhere[as in a popular Kaffe even]and they can be playing for Money,all out on the table,and as long as there ain't a per hand charge getting got by what's called d'Organizer,well Ivan that's Legal,like in d'Magna Carta sense, like Ingot
Trust me it's TRUE
Basically it's legal to gamble as long as a House/Bookie/Spiv!!is not taking d'cut,like diddling d'Probabilities.
So What??!! i hear d'muttering BUT CMC d'Market Maker would be RED HOT GOOOONE on a dis-oderley,hey?if cfd were gambling that is.
Just doin a Numbers Racket churning out 20 lines on a Sunday Arvo.
ps- really looking forward to a Reply,palanquin.
later Ivan,rajneeshyfella,u2zoob.
Avatar- PHACOPS{speculator}from the Devonian Period.
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msparks
Member
Username: msparks
Post Number: 492
Registered: 10-2004
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Votes: 0
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| | Sunday, May 07, 2006 - 02:18 pm: |
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Ingo
What you have suggested could be happening now anyway ?
Big players manipulating a price and cleaning up on the cfd.
Or even loading up on a cfd shorts with 2 or 3 providers, and then dumping their holding in the actual share.
Like betting in the ring, hitting all the bookies at the same time to get the price before they see other bookies dropping the odds.
The mind boggles at what a very large shareholder could easily do, if using cfds as well.
Would it be illegal ?
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ingot54
Member
Username: ingot54
Post Number: 1463
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 03:27 pm: |
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Mark - at the moment there are restrictions on position sizes at some providers. This is particularly so with Limited Risk Accounts (GSLO).
I once tried to open a position of 40,000 VCR (long). I could only get 2 X 20,000 positions, provided I set the GSLO at least 1.5% apart, from memory.
As I have not traded the DMA (Direct Market Access model, I can not speak for this.
Your point is valid, however, as it DOES leave the CFD derivative instrument open for manipulation, purely by reason of the leverage involved, as per my post above.
In your example, the market "dump" could ride along with a sell of the CFD long position, then open a short position, and win as it slides in the opposite direct direction.
Nothing is illegal, until you get caught. Then, if you can afford the Barrister, the fine is piddling, or zero.
If you do a Google on "Nomura" you can find many other cases whereby Nomura are linked to organised crime, the Yakuza in Japan - this is public domain information - not my musings.
Consequently, where do you think they would find a judge in Japan who values justice more than his life, or the life of a member of his family?
How much justice is there in fining Nomura, and its directors such piffling pittances, when they set out to rip off millions of market participants, using $600 million as a tool? Remember, the Indexes are leveraged instruments, so $600 million buys a lot of the Top 5 companies, which move the index.
What was the fine?
350,000 pounds plus costs.
Dug - You've crossed over into cryptic again - but I understand some of it. Stamp duty no longer applies on transactions, but I'm sure the providers are hit with a turnover tax, same as the bookies. Once a tax, always a tax - it's only the name that changes.
I don't have a problem paying legal taxes - But the ATO is still full of BS and double-speak.
They are so up themselves, with their legal-speak, and case studies and precedents, that they can NOT simply say: "All profits on CFD's will/will not be taxed."
Why don't they do that?
Could it be that there are different "interpretations" for the privileged, who are able to pay for "correct" taxation advice for submissions of their returns? Or structure their situation to get around the law?
You would have seen this, Dug. Did you get frustrated when you saw it? The rich structuring assets so that they are/were hidden from assessment? The middle people unable to do it?
Just like Doctors on $200k were able to negative gear to the hilt, artificially lowering their taxable income, and thus qualifying their kids for Austudy (this is true - 1987), but people on a small wage, but earning "too much income" to qualify their kids for Austudy, had to pay up to send their kids to the same educational facilities.
Government for the people, by the people?
Cough! Cough!
Yes, I am happy to pay legal taxes.
Keep Smiling
Trading style :CFD's predominantly long term.
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azure
Member
Username: azure
Post Number: 13
Registered: 02-2005Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 04:57 pm: |
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I fail to understand all the griping I'm reading here about tax. Everyone always seems to complain about 'money the government takes from me', rather than 'money raised from the population to pay for services like roads, hospitals, armies etc'
Negative gearing your income down to low levels is all great unless you want the money to live on.
Trading gives you far more opportunities to reduce your tax burden than the average PAYG punter gets.
o You can spread your investments (or trades) over both partners and take advantage of one's lower tax rate.
o If you hold your positions for a year you halve the amount of tax. (not many deals better than that!)
o you can structure your trading in a company or trust and gain more control over the tax you pay.
o you can use your trading skills to improve your super returns and get all the concessional tax benefits of a super fund.
o and you can negatively gear to reduce your tax rate (although personally I prefer returns big enough to be positively geared)
Apologies if I have strayed too far from the topic of CFD providers.
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ingot54
Member
Username: ingot54
Post Number: 1467
Registered: 05-2004
Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 05:39 pm: |
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Azure - that's a great and positive post.
I agree - my goal is to pay $1 million - in legal taxes.
And yes, there are many options to structure our assets and income to achieve this.
Because taxation is such a sensitive issue, we are all interested in seeing how to minimise our personal tax legally.
There are currently two schools of thought, and no clear position from the ATO, despite their statements.
Thus this discussion.
It amazes me that the ATO allows me to trade in my wife's name, or in joint names, as you say, yet does not allow income-splitting for families with one breadwinner.
I can trade in my wife's name if I wish, but she may know little about what I am doing. Yet this is "legally" her income, even if generated by someone else.
Quite an absurd position when you think about it - trading in joint names! Does that means both parties put their finger on the "send" button together, when executing an electronic trade?
Yes, I know "That's the way it's done" but why?
If we trade in joint names, but my wife does not have a clue about what a stock is, how can she equally make a decision?
Answer is: She can't. She relies on me to do her bit - just as she relies on me for our single income.
But strange how her name does not appear on my payslip, when she does not have a clue about my other work either!
Just an ongoing whinge about inconsistency in high places.
Doctors can form a company and call themselves "Dr Jenkins Pty Ltd" but the rest of us can't. But there are legit reasons for that too, which I don't dispute ... just wonder about the equality of it.
Keep Smiling
Trading style :CFD's predominantly long term.
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dug
Member
Username: dug
Post Number: 1055
Registered: 07-2005
Rating: N/A
Votes: 0
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| | Sunday, May 07, 2006 - 05:49 pm: |
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Azure-How you describe 'being proper' re Tax is the right way to think.Yes you can have lots of 'LoopHoles' when you are in Profit.
The hard time starts when you come to claim Losses.
Azure,the Office is a Harsh Judge of unfortunates,what's called Losers by d'Forum's more heady members.
So when you have an overall loss year,azure,get back to us with your Office is Ok.Good Luck.
Ivan-THEY[d'Office]instituted the Audit[poor man's Investigation]when I was bushy tailed,on the get ahead,ya know?Anyway,I got plopped into a Cmth Car with an expense account and sent to the Sunshine Coast for 3 days of trawling thru Cash Recievers[obviously BLACK]
Anyhow,there was this milkman[it was mid70's milkmen still existed]anyway,out I cruise in this Cmth Falcon to do d'Business.
Ivan,mate,this bloke was living on this dusty farm,pure Ma'n'Pa Kettle,snot nose kids in rags like the LOT!!
well,I wasn't gunner find Anything.Pure Battler on his last legs.
So I come back to d'Office and I,I was d'Only One to find NOTHING to kick off d'Audit system for the Bosses.You can imagine THEY were NIX HAPPY!!my career became a bit woebegone,ya know.Had to cross over to Brian Maher and Associates to get a go!!suited me better bein' for d'Other Side,made more money too,but dats another story.
cheers,
jr
Avatar- PHACOPS{speculator}from the Devonian Period.
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palanquin
Member
Username: palanquin
Post Number: 6
Registered: 04-2006 | | |
