Without reviewing my research, my recollection is as described below.
* The big advantage of MM CFD providers is that they typically offer a guaranteed stop, albeit at a price. Hence, if the market falls off a cliff on the weekend, the stop that you set on a Friday will be guaranteed on the Monday morning even if your favourite stock gaps down to say 20% below your specified stop position, and conversely for short trades.
* The spread on stocks via a MM CFD provider can sometimes be smaller than the actual market, but can also sometimes be greater than the actual market spread.
* DMA CFD providers typically use straight through processing (STP). Hence, when you hit the button, your order is applied virtually instaneously.
* MM CFD providers appear to utilise a re-quote method on occasion. I am not sure what this really means, but I noted in the past that some HotCopper posters were upset about it.
* With a DMA CFD provider you are only playing the market, but with a MM CFD provider you could be also playing against the CFD provider simultaneously as well. However, I have not confirmed this point, it is just something I have read somewhere.
Regarding cost, I am familiar with commissions and interest on open positions, but these are both at fixed rates. Well almost fixed as the interest is tied to the RBA rate +/- a fixed percentage. However, I have not come across a ‘holding cost’, particularly a holding cost that increases astronomically without notice.
After considering all of the factors, and despite the fact that the guaranteed stop is very attractive, I decided to open a CFD account with a DMA CFD provider. I have not regretted that decision.
After 12 months of CFD trading in 2006/07, and 3 months of trading more recently, I have racked up roughly 15 months of CFD trading. I cannot wait until I have racked up 18 months of trading so that I can officially declare myself to be a gambler. Gamblers pay no tax … lol and GL.
