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An introduction into exchange traded contracts for difference (eCFDs)

by , 08 May 2014

Up until last year, the contracts for difference (CFD) market was completely over the counter in South Africa. This meant that companies became ‘market makers' to facilitate the trading of CFDs. And they provided liquidity. But last year, the Johannesburg Stock Exchange introduced exchange traded contracts for difference (eCFD). So what are these? What's the difference between an eCFD and a CFD you trade through a market maker? And how can you trade eCFDs? Let's take a closer look…

What is an exchange traded contract for difference?

An eCFD has a listing and trades on the Johannesburg Stock Exchange, explains the JSE’s website. SAFCOM acts as the clearing house for the JSE.

An eCFD and a CFD still work in the same way. You can read more about this here.

The fundamental difference between an eCFD and a CFD is how they trade. You trade eCFDs through the JSE. This makes the JSE the central market maker. You trade CFDs through a market maker, such as Global Trader.

Because you trade eCFDs through the JSE, this means they’re regulated products. This eliminates any chance of third party risk of defaulting.

When you trade CFDs through a market maker, and not the stock exchange, the Financial Services Board regulates the market maker.

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How can you trade eCFDs?

When you trade eCFDs, you do so through your stockbroker. Just as you would if you were trading single stock futures.

If you trade CFDs you can do through a trading account with a bank or spread trading company.

The JSE isn’t the only stock exchange to offer CFDs. Back in September 2007, the Australian Securities Exchange began offering CFDs.

There are a huge variety of equities with eCFDs listed on them. Just give your stockbroker a call to find out more.

So there you have it, an introduction into eCFDs.

An introduction into exchange traded contracts for difference (eCFDs)
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