Online broker Pure Trade (www.puretrade.com) announced it will offer traders CFDs on more ASX equities than any other online broker. The news comes at a time when CFD trading is quickly gaining popularity among online traders, contributing 35% of ASX turnover in 2010.
Since the launch of CFDs (contracts for difference) in Australia in 2001, the market for the product has grown considerably with volumes estimated to account for 35% of ASX turnover in 2010. The latest entrant into the competitive online broker market, Pure Trade, announced that it would offer the popular derivative on all ASX equities – more than any other broker. “CFDs are the product of choice for many traders because they require a small amount of capital and have the potential to return significant gains” - in the words of a Pure Trade spokesperson.
CFDs enable purchasers to buy stock on margin, typically between 5% and 20%. This means for every 1 share bought, the purchaser receives the equivalent of 20 shares. If the share price goes up, the purchaser benefits as if they owned 20 shares and similarly, if the shares go down, the purchaser loses the equivalent loss on 20 shares. CFDs facilitate this process without the title to the shares ever actually changing hands i.e. the purchaser does not actually own the stock, only the right to the benefit or detriment from the changes in price. For this reason, it is possible to go long or short on a particular stock simply by buying or selling the associated CFD (www.puretrade.com/webiress).
The announcement from Pure Trade is evidence that this form of trading is growing rapidly. With the internet reaching an increasing number of homes around the world, it is astonishing just how accessible CFD trading has become. As the market continues to grow and gain momentum, it will be interesting to see what other innovations emerge from Pure Trade and other online brokers.
Pure Trade is a division of Global Prime Pty Ltd ABN 74 146 086 017 AFSL 385 620 (www.globalprime.com.au) and offers online trading in foreign exchange, CFDs, Options, Futures and equities via Direct Market Access and the latest trading platforms. Global Prime operates out of Sydney, NSW.
P: +61 2 8277 6626
M: +61 422 015 857