What do brokers like IC Markets, IG Markets, Exness,... do with CFDs?
What do brokers like IC Markets, IG Markets, Exness,... do with CFDs?
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Kim Mỹ · External communityPost link
External question — Personal Finance Stack Exchange
Author: Kim Mỹ
Original post: https://money.stackexchange.com/questions/144045
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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I understand that I don't own any share if I do CFDs but does the broker like IC Markets, IG Markets, Exness, ... buy the actual shares if I do CFDs trade buys or the broker does not buy the actual share and the profit/loss of trades are only generated through the broker's registered users buying/selling CFDs?
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Philip · External communityPost link
External answer — Personal Finance Stack Exchange
Author: Philip
Original post: https://money.stackexchange.com/a/144050
License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/
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The majority of sellers of CFDs are in effect bookmakers, purely selling a contract to pay y if x event happens.
Just like sports bookmakers, they make their money off of the spread they charge (difference between bid and ask), and/or trading fees.
Again like sports bookmakers, they prefer to just balance all this action internally and not have to buy or sell the underlying (in the case of CFD offerors: shares, in the case of spots bookmakers: betting with other on the event in question bookmakers to lower their risk). Doing this always carries a cost which is why in both cases the original party is loathe to do it.
As a result, some will have positions in various stocks depending on the underlying action from their customers, but the majority will just be laying bets and not hold much/any of the underlying unless forced to by very lopsided action.
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Quoted from Forex.com.bd-Editorial External answer — Personal Finance Stack Exchange Author: Philip Source score (net votes, not local likes): 3 Original post: https://money.stackexchange.com/a/144050 License: CC BY-SA 4.0 — https://creativecommons.org/licenses/by-sa/4.0/ Adaptation: HTML converted to plain text; contact email addresses removed. The majority of sellers of CFDs are in effect bookmakers, purely selling a contract to pay y if x event happens. Just like sports bookmakers, they make their money off of the spread they charge (difference between bid and ask), and/or trading fees. Again like sports bookmakers, they prefer to just balance all this action internally and not have to buy or sell the underlying (in the case of CFD offerors: shares, in the case of spots bookmakers: betting with other on the event in question bookmakers to lower their risk). Doing this always carries a cost which is why in both cases the original party is loathe to do it. As a result, some will have positions in various stocks depending on the underlying action from their customers, but the majority will just be laying bets and not hold much/any of the underlying unless forced to by very lopsided action.
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