Agree alanmcg,
the DMA CFD is a good product and it ought to be a safe one. It is effectively a margin loan arranged in an instant (but of course with pre-approval credit checks). The problem with MFG was not related to do with CFDs (which they only offered in Australia in any case) or any of their other products - but the way they handled the pooled cash of their clients.
All financial institutions effectively pool the cash of their customers and invest it elsewhere, but there are much stricter rules in place when it comes to retail banks. That's one of the issues here.
Another is government guarantee for financial services customers. Most countries have a fund that compensate if a broker goes bankrupt. In Australia our National Guarantee Fund will only compensate if it is equities that are being traded, CFDs are viewed as a derivative even if (as in DMA) an equity trade underlies this.
The politics behind this is the battle between full-service brokers vs the online usurpers. Full service brokers have a monopoly on direct short selling in stocks (supposedly to protect the less sophisticated retail crowd from this dangerous activity). However online brokers are allowed to offer short selling in the form of leveraged derivatives, trading against counter-parties of unknown financial stability - as though this were somehow safer.
The full service brokers are of course thrilled to bits by the demise of MFG, and no doubt in full support of calls to regulate the industry to death. A better solution for a competitive market may be to allow online brokers to offer short selling and compete on an equal basis.
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