If CFD providers are buying the securities purchased as...

If CFD providers are buying the securities purchased as protection (they would be stupid if they didn't since they are offering no spreads for FPO's, what holding name would they fall under. ie is it a nominee/custodian setup.

For indexes/futures etc they offer spreads (to cover their own risk) hence are free to trade mostly (and is just like the casino imo).

For FPO's you pay interest, and are less riskier than indexes therefore the provider has to buy/sell part/all of the physical to account for the overall risk/positions of the provider and traders or front up the cash themselves as a hedge.

Since I think this is the case (they are buying the physical to accept the traders' risk), what name would they fall under, for example IG Nominees. What then do they do with this stock. Do they lend it out to banks/hedgefunds in return for margin accounts to show increased liquidity. Do they borrow the stock if a trader takes out a large short position.

If this is the scenario, they share the exact same risks and fate as Opes Prime.

Hence EVERY market participant should be asking this same question to CFD providers since CFD providers are a little bit larger in popularity now and in my opinion present a greater EFFECT on the market as a whole if they are using this method of hedging and managing risk.