I'm not concerned about people's own level of risk. Thats their problem. I am concerned about the behind the scenes practices of CFD providers.
Since I'm a smalltime nothing investor I am looking for information from anyone here on HC that has had experiences in these matters.
Let me play out a scenario.
I have a spare 20K and decide to invest it in ANZ CFD's(poor example I know).
This can give me an exposure in ANZ of 200K. LVR of 10% ie they loan me 90%. All the same rules as margin lending apply.
Now what does the CFD provider do? They will accept my risk and buy the 200K exposure to ANZ I want on market and charge me interest on 180K. If they didn't buy my order on market - well its me against the house, and if I made 30K on ANZ and they didn't purchase the underlying - the CFD provider is now down 30K in cash.
If the ANZ sp moves in my direction, the CFD provider has covered their risk by buying the underlying. If the sp moves against me (and them), I get a phonecall immediately telling me im in a margin call - sell or provide more capital.
My question is what name does the CFD provider purchase the shares under?
And how are they managing these share purchases.
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