Irish Finance Minister Brian Lenihan will publish new rules regulating derivatives within a month, forcing investors to disclose the building of  stakes in companies  using such instruments. The new rules will govern so-called contracts for difference, which enable investors to bet that a share price will rise or fall without owning  any of the stock. Investors can agree at a later date to acquire the underlying shares from their CFD providers.

“We expect to have legislation on the matter published within the next four weeks,” a spokesman for the Dublin-based Finance Ministry said, without giving any details. Last year, the U.K.’s Financial Services Authority said it would bring forward the introduction of new rules which required long positions which use CFDs to be made public when holdings reach 3 percent.

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Tracking SmartStream has announced that CMC Markets, a financial spread betting, CFD  trading and FX trading company, has gone live on TLM OnDemand, SmartStream’s SaaS reconciliation service. To further enhance its operational efficiency and client service, CMC Markets selected SmartStream’s TLM OnDemand that offers the market leading reconciliations functionality as fully managed service. Further, the implementation program offered by the service would enable the firm to benefit from automated transaction processing that lowers exceptions and improves operational efficiency. After a short period of internal testing, TLM OnDemand in now live at CMC Markets processing the firm’s cash transactions.

Colleen Bohm, finance systems manager at CMC Markets, said: “TLM OnDemand was attractive because it introduces automated transaction processing with proven technology that will enable us to improve efficiency and lower costs. It is testament to the collaborative effort between CMC Markets and SmartStream that we have, in a short period of time, managed to install, test and go live with an entirely new solution for our back office environment.”

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The LSE (London Stock Exchange) yesterday announced that it was extending its UnaVista business service to the swaps market, automating  the trading of contracts for differences and other security derivatives and allowing brokers, hedge funds and prime brokers to communicate and match data through a central, secure, audited platform. It is understood that the new service is being tested by a number of hedge funds, prime brokers and executing brokers.

Mark Husler, Head of Information Services Business Development at London Stock Exchange Group, said: “For the first time UnaVista is now available for Swaps, helping our customers to streamline trade processing. The new Swaps Portal from UnaVista avoids the need for time-intensive, manual processes such as emails and faxes. It allows both small and large firms alike to connect in a cost-efficient manner, and provides the functionality to match trades and resolve exceptions on trade date.”

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Australian Securities and Investments Commission (ASIC) has released a new guide that aims to provide retail investors with clear, independent advice on how contracts for difference (CFDs) work and the significant risks that can be involved in CFD trading.

The “Thinking of Trading Contracts for Difference?” guide explains why retail investors should consider trading CFDs only if they have extensive trading experience or are used to trading in volatile market conditions and can afford to lose all of, or more than, the money they put in.

“Our research with CFD traders found that many traders don’t know or don’t appreciate key aspects of how CFDs work, despite the fact that they are actively trading them,” ASIC commissioner Greg Medcraft said. “This  guide aims to  fill some of these knowledge gaps, especially around the trading risks.” Medcraft said retail investors who use the guide will be able to make more informed decisions as to whether CFD trading is for them. According to ASIC, the guide includes explanations around how CFDs work, including how trading CFDs differs from investing in shares and the questions that a retail  investor should ask a provider before they agree to trade in CFDs. It also explains the different CFD provider business models, including differences between over-the-counter and exchange-traded CFDs, and common traps to avoid.

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ASIC has turned its attention to over-the-counter contracts for difference (CFDs), and is calling for improved product disclosure to help retail investors understand the highly leveraged derivative products they trade. The corporate regulator released a Consultation Paper, including a draft regulatory guide which proposes an ASIC benchmark-based disclosure model for CFDs. According to the paper, CFD providers will need to provide PDSs and ongoing disclosures that require them to address the benchmarks on an “if not, why not”  basis. ASIC’s model will address four aspects impacting investors: ensuring client suitability, disclosing counterparty-risk, stewardship of client monies and practices where issuers make margin calls on clients.

Greg Medcraft, ASIC commissioner, said investors may not necessarily understand the risks of trading CFDs due to product complexity - however the lack of clarity in current disclosure statements are another barrier for investors  in understanding key information. “It is crucial this information  has everything retail investors need to make an informed decision, including spelling out the very significant risks of CFD investment,” he said. Barry Odes, managing director of Australia and New Zealand, CMC Markets, acknowledges ASIC’s concerns and said the firm recently created an understanding the risks” section of the CMC website to improve investor education. “The objective of this consultation paper is to ensure that all CFD traders and prospective traders have a sound level of understanding  of the product and risks associated with trading it regardless of the CFD provider they deal with, which is something we fully support,” he said.

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Clients of CFD trading company IC Markets are the first to benefit from the company’s new commission structure, clients are expected to save millions this year thanks to the company’s new tiered direct market access (DMA) CFD commission rates on the webIRESS Plus trading platform. An active CFD trader trades on average four times a day with a trade size of approximately $20,000. Most DMA CFD providers would charge this trader 0.10% commission on a $20,000 transaction. Over the year this trader would pay over $40,000 in commission charges alone. With IC Markets new active trader tiered commission rate of 0.05% this trader would only pay around $20,000 in commission, a 50% saving  without even considering the saving in financing charges. With IC Markets tiered commission rates active traders on 0.03% commission can save as much as 70%.

International Capital Markets (IC Markets) Managing Director Andrew Budzinski said: “We understand commission rates are important to active CFD traders and we are committed to providing our clients with low DMA CFD commissions and the latest trading technology.” IC Markets new webIRESS Plus platform allows its clients to trade DMA CFDs on global exchanges as well as ASX listed shares. “IC Markets is committed to offering low commission rates allowing our clients to take of advantage of more trading opportunities and gain an edge in the market. Our new tiered commission structure on the webIRESS Plus platform reflects our commitment to provide industry leading software and excellent value for money cementing our position as a market leader in DMA CFDs,” Mr Budzinski said.

Active trading clients of IC Markets are given priority access to highly sought after Initial Public Offerings (IPO’s) in addition to a wider range of short-sellable CFDs. Contracts for Difference (CFDs) are an agreement to exchange the difference in value of a particular asset between the time at which the contract is opened and the time at which it is closed.

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Irish Finance Minister Brian Lenihan will publish new rules regulating derivatives within a month, forcing investors to disclose the building of stakes in companies using such instruments. The new rules will govern so-called contracts for difference, which enable investors to bet that a share price will rise or fall without owning any of the stock. Investors can agree at  a later date to acquire the underlying shares from their CFD providers.

We expect to have legislation on the matter published within the next four weeks, spokesman for the Dublin-based Finance Ministry said, without giving any details. Last year, the U.K.’s Financial Services Authority said it would bring forward the introduction of new rules which required long positions which use CFDs to be made public when holdings reach 3 percent.

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London Multi-Asset Exchange Limited (LMAX), has announced that they now have the ability to trade contracts for difference. After receiving FSA approval, plans are already in place to initiate their MTF platform, which is a multilateral financial trading facility. Betfair, who is one of the top online leading global betting companies,  is the majority shareholder of LMAX, and the company was established by Betfair back in 2007 aimed at providing financial and Forex trading services. There seems to be a lot of movement lately in terms of investment into the CFD market, where many brokers and financial services companies are starting to offer CFDs. If Betfair’s new venture is as successful as their betting exchange, LMAX should could be an emerging financial company for investors to look out for.

http://www.mydeltaquest.com/2010/cfd-exchange-launched-betfairs-lmax/

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The winner of  the Axi Trader CFD trading competition managed to turn $50,000  into $836,216 in just 1 month.  And in tenth place the trader more than doubled their account in just 1 month.

This is an impressive trading result and an indication of what is possible trading CFDs.

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The founders of the collapsed contracts for difference provider Sonray Capital Markets withdrew hundreds of thousands of dollars from client accounts and put the money into their own accounts using a complex system to conceal the transactions, a public examination heard yesterday.

The co-founder Scott Murray said he used multiple ”house” and unfunded accounts in various names, including at least one client’s name, in an effort to make successful trades and recover amounts that had been transferred out of the clients’ pooled account.  Mr Murray was being examined as part of Ferrier Hodgson’s investigation into the firm’s collapse, which left a $46.7 million hole in investors’ trading accounts.

Sonray also directly paid the mortgage repayments on a holiday home in Sorrento, Victoria, that was owned by the other founder, Russell Johnson. The home doubled as a disaster recovery residence for Sonray as it had a computer on the premises that had access to the trading platform.

The examination of Mr Murray, the chief executive of Sonray, in the Victorian Supreme Court in Melbourne, heard that clients’ money was withdrawn from a segregated account and lent to his father, John Murray. The two loans, one for $100,000 and another for $300,000 were at no interest.

The examination heard that money was also transferred from client segregated accounts to pay creditors relating to the building of a wholesale trading platform. Funds were then withdrawn and deposited into his bank account to pay his home mortgage.  Mr Johnson used an estimated $550,000 for his own personal purposes, it was alleged.
Mr Murray rejected the allegation that the transfer of money was concealed. He said in the early days of Sonray being set up he was paid little in the way of salary. Sonray, which Mr Johnson and Mr Murray founded in 2003, went into external administration on June 22, after a bailout attempt by Saxo Bank fell through.

Mr Murray has since given an undertaking to the Australian Securities and Investments Commission that he would not leave Australia without consent, and Mr Johnson has surrendered his passport. Mr Murray said there had been deficiencies in client accounts for years and that Saxo Bank was aware that hedging was being done in house accounts in  mid to late 2008.

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