to finish in the positive today, page-22

re: christianp Evening Gse,

It took me a little while to get my head around CFD's.
It's just like placing a bet, but in this case a bet on a particular stock. You don't own shares or any physical property. The only thing you own is a contractual right, between you and the particular CFD company, for example CMCGroup. In this way you are making a contract at arms length - principal to principal - just like a bet with a bookmaker. They are not agents, because you aren't buying shares or any property through them. It's just a contract.
The particular CFD operator will assess all the open contracts it has with the "punters" like me, and hedge itself on the market according to this, and its own risk strategy.

This part is where I am a little sketchy, and the area of concern for many people. It is opinion only,please don't take my word for it.
Whether the money in your trading account is held in "trust", or not, seems to differ between the CFD operators. I know that IG Markets have "trust account" in the title of their client accounts, but I don't know if CMCGroup runs trust accounts. Might be wrong here - and just because it says "trust account" doesn't necessarily mean its legally held in trust.
In the event that CMCGroup suddenly becomes insolvent (no trust accounts), you would be an unsecured creditor I believe. This doesn't mean you wouldn't get the balance in your account back, nor any equity owing to you from open contracts (CFD'S) --- but it is a risk. However, if your money is held in trust, you have a better chance of getting your money back, as long as the company hasn't breached the corporations law by using the trust money and blowing it. Gaol time for them though lol.

If CMCGroup, for example, wanted to shut down their operation for some reason and they weren't insolvent, then they would probably take a look at all the open positions (bets), then close them all off at a specific time on a specific date. They would presumably give their clients some warning before this happens. However, they have the discretion to do whatever they like on this point I believe, subject to the terms and conditions, and also rememebering that the CFD client has contractual rights at law.

Overall, CMCGroup seem to run a pretty slick worldwide operation, although I don't know the exact details of their risk management and hedging etc.

One thing to do though --- is have only as much capital in your account as you need to trade. That is, don't have a heap of dormant cash in the account - just in case something does go wrong.

Hope this helps a bit

Cheers,


Christian