and commissions and dealing with settlement process for that product. Contradictory One of the ways to mitigate this risk is the use of stop loss orders. CySEC the Cyprus financial regulator, where many of the firms are registered, increased the regulations on CFDs by limiting the maximum leverage to 50:1 as well prohibiting the paying of bonuses as sales incentives in November 2016. The Australian financial regulator asic on its trader information site suggests that trading CFDs is riskier than gambling on horses or going to a casino. "asic raises alarm over new CFD trade risks". Archived from the original. John quelle crypto monnaie ledger nano s Wiley Sons, 2011. . Futures contracts tend to only converge to the price of the underlying instrument near the expiry date, while the CFD never expires and simply mirrors the underlying instrument. In fast moving markets, margin calls may be at short notice. This is also something that the Australian Securities Exchange, promoting their Australian exchange traded CFD and some of the CFD providers, promoting direct market access products, have used to support their particular offering. The CFD market most resembles the futures and options market, the major differences being: 19 20 There is no expiry date, so no time decay; Trading is done over-the-counter with CFD brokers or market makers; CFD contract is normally one to one with the underlying.
Ultimately, the degree of counterparty risk is defined by the credit risk of the counterparty, including the clearing house if applicable. Criticism has also been expressed about the way that some CFD providers hedge their own exposure and the conflict of interest that this could cause when they define the terms under which the CFD is traded. In markets such as Singapore, some brokers have been heavily promoting CFDs as alternatives to covered warrants, and may have been partially responsible for the decline in volume of covered warrant there. OTC CFD providers are required to segregate client funds protecting client balances in event of company default, but cases such as that of MF Global remind us that guarantees can be broken. Although no firm figures are available as trading is over-the-counter, it is estimated that CFD related hedging accounts for somewhere between 20 and 40 the volume on the London Stock Exchange (LSE). 4 need"tion to verify Retail trading edit In the late 1990s, CFDs were introduced to retail traders. Criticism edit Some financial commentators and regulators have expressed concern about the way that CFDs are marketed at new and inexperienced traders by the CFD providers.