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Contract For Difference Overview
What Is A Contract For Difference (CFD)?
|Benefits of CFD|
|Free Up Your Capital and Get More Leverage!
With LTS CFD-SGX, you can get up to 10 times for STI component stocks and up to 3.3 or 5 times for non-STI component stocks of your capital invested by simply depositing cash and/or share collaterals.
|Convenience of Short-selling
You can short without worrying about buying-in or having to borrow shares which are both expensive and inconvenient.
|Benefit From Adverse Market Conditions
Use LTS CFD as a hedging or risk management tool by counter-balancing against exposure on an existing physical shareholding.
INTRODUCTION TO CONTRACT FOR DIFFERENCE (CFD) DIRECT MARKET ACCESS (DMA)
Benefits of CFD (DMA)
- 100% transparency in pricing
- Trade directly into the market
- Greater control over the execution of orders
- DMA orders can be submitted during the pre-opening and pre-closing periods
CFD-SGX Trading: What You Should Know
The client has the responsibility to fully understand the Terms and Conditions of the transactions and the client's rights and obligations under any agreement, contract or confirmation that the client may enter into with LTS.
Commission, Interest And Other Charges
Before the Client begins to trade, the Client should obtain a clear explanation of all commissions, interests, fees and other charges for which the Client will be liable. These charges will affect the Client's net profit (if any) or increase the Client's loss. The Client is liable for all of these at the rates determined by LTS as may be amended from time to time.
The high degree of leverage that is often obtainable in margin trading can work against the Client as well as for the Client due to fluctuating market conditions. The Client may sustain large losses as well as gains in response to a small market movement. While the amount of the initial margin required to enter into a transaction may be small relative to the value of the transaction, a relatively small market movement would have a proportionately larger impact. Hence, in the event of unfavourable movements, the risk of loss can be significant. The Client may sustain losses in excess of the Client's cash and any other assets deposited as collateral with LTS. The Client will be liable without limit for all losses, including but not limited to interest charges.
Inadequacy of Security Margin or Collateral
The Client may be called upon at short notice to make additional margin deposits or interest payments of substantial amounts. The Client should be aware that the Client might not be given an extension of time when a margin call is made. If the required margin deposits or interest payments are not made within the prescribed time, the Client's collateral may be liquidated without his consent. Moreover the Client will remain liable for any resulting deficit in the Client's Account and interest charged on to the Client. The Client should be aware that LTS might liquidate the Client's collateral without contacting the Client. Further, LTS may be entitled to decide which collateral to liquidate in order to best protect LTS's interests.
If the Client does not provide the required additional funds or fail to make interest payments within the prescribed time or if the market moves against the Client further before the receipt by LTS of the additional funds, notwithstanding that the prescribed time has not elapsed, LTS at its sole discretion may (but is not obligated to) close all or any of the Client's positions that the Client may have and liquidate the Client's collateral in any event without the Client's consent or prior notice.
If the amount is still not adequate to meet the Client's obligations to LTS, the Client should be aware that the Client would be liable to LTS for the difference. Thus the Client should not commit to any transaction that is beyond the Client's means and should carefully consider whether such trading or financing arrangement is suitable in light of the Client's financial position and investment objectives.
Suspension or Restriction on Trading
Market conditions and the rules and regulations, which govern the relevant markets are beyond the control of LTS. These market conditions and/or rules may give rise to events and/or circumstances (including but not limited to illiquidity, or suspension or restriction on trading) which may make it difficult or impossible to effect transactions and/or liquidate or offset positions and/or take any steps which the Customer may otherwise wish to take.
Transactions in Other Jurisdictions
Transactions in markets of other jurisdictions whether or not linked to the Singapore market may expose the Client to additional risk. These markets in other jurisdictions may be subject to rules and regulations which have different or diminished investor protection. LTS undertakes no responsibility and/or liability as to the Client's awareness and/or understanding or otherwise of these rules and regulations. The Client is assumed to be aware and to understand these rules and regulations of the foreign jurisdictions. Notwithstanding existence of these rules and regulations, neither LTS nor the Singapore regulatory authorities can compel the enforcement and/or adherence to the same.
The profit or loss arising from transactions in markets of other jurisdictions and/or foreign currency denominated securities will be affected by fluctuations in foreign exchange rates.
Trading Facilities and Electronic Trading
LTS's trading facilities are supported by computer-based systems which deal with all aspects including but not limited to order-routing, execution, matching, registration and clearing of trades. There are inevitable risks in such systems including but not limited to the failure of hardware and/or software which could result in the Client's instructions not being executed accurately or at all. The Client should also be aware that the Internet may not always be a reliable transmission medium and hence there may be unexpected delays or stoppages in service provisions.
In providing a liquid market and prices for CFD transactions, LTS hereby notifies and the Client hereby consents that LTS may act as market-maker for the Client's CFD transactions. Unless otherwise specified or agreed, LTS shall act as principal to the Client for CFD transactions.
Direct Market Access
The client's buy and/or sell order goes through LTS's CFD platform and the client gets access to the market directly in which the price paid is determined by the market of the underlying shares.
LTS CFD is an Over-the-Counter ["OTC"] product. LTS shall act as principal to the client for CFD transactions.
LTS does not engage external counter party to provide CFD trading to clients.
Delisting of the Underlying Security
LTS shall have the right, at its discretion, to close or terminate the CFD contract and cash-settle the contract at such
price(s) which LTS shall determine. There will be no share delivery for the settlement of such CFD contracts.
|CFD Potential Trading Strategies|
Going short is one of the principal attractions of CFD trading. By taking a short CFD position, a profit will be reaped if the price of the underlying share falls.
This involves short-selling a security and simultaneously buying another (usually in the same sector) to set up a performance trade. Conducted in the correct ratio, this leaves the investor market neutral whilst having an exposure to the relative strength of both buying and short-selling stock.
By using LTS CFD to hedge an existing physical shareholding, it is possible to reduce market risk. For example, an investor may want to temporarily reduce exposure to a security but, as the longer-term view remains positive, does not wish to effect a sale of the physical holding. By taking an offsetting position, CFD can be used to help reduce the short-term exposure.
Comparison Of Conventional Share Trading And CFD-SGX Trading
|Description||Conventional Share Trading||LTS CFDs-SGX|
|Capital Outlay||100% of market value||From 10% of market value|
|Leverage||NIL||Up to 10 times for STI component stocks
Up to 3.3 or 5 times for non-STI component stocks
|Settlement Period||2 market days||NIL|
Why trade CFD-SGX with limtan.com.sg?
- The counterparty for CFD-SGX Trade is LTS.
- Clients' cash collaterals are held in trust accounts at a regulated bank in Singapore.
- Clients' share collaterals are held in sub-accounts with CDP, a wholly owned subsidiary of the SGX.
- LTS hedges its counterparty risk by buying shares directly in the ready market or borrowing shares from CDP under their Securities Borrowing and Lending programme. These shares are then held in custody with CDP.
Find out more on CFD Promotion.
There are profit opportunities as well as risks in trading CFD as a result of market fluctuations. You should understand CFD and their risks when using them. You are advised to read the Terms and Conditions before investing through this product.
For more information on LTS Contract For Difference, contact your Trading Representative or our Online Trading Helpdesk at +65 6799 8188. Alternatively, contact our CFD Department at +65 6437 0120/0147/0165 today.
This advertisement has not been reviewed by the Monetary Authority of Singapore.