Find the best platform for You to Trade CFDs in Singapore
We previously introduced readers to the Contract-for-Difference (CFD) financial instrument and highlighted its advantages and risks as an investment product.
For those who find CFDs appealing, the next step is selecting a suitable broker to kick-start your trading journey.
But before we start listing out the various CFD brokers found in Singapore, here are some things that you should be aware of before making your choice.
First and foremost, is the CFD broker regulated by MAS?
Just as you would deal with any financial institution, you should do the necessary due diligence checks to verify whether the CFD provider has a license to operate in Singapore.
It is important to ensure that the local entity is regulated by the Monetary Authority of Singapore (MAS) because it would mean that they have complied with strict requirements such as ensuring that your funds are segregated into a separate trust account administered by another 3rd party custodian.
In the event that the broker is facing bankruptcy, these segregated funds held in the trust account are legally protected and cannot be used to pay off the broker’s outstanding liabilities.
A good example of this is the case when one of the world’s largest broker, MF Global, went into insolvency in 2011; and even though it took quite some time, the liquidators were still able to recover the customers’ funds.
What type of CFD broker is it? Market Maker or Direct Market Access?
CFD providers can be divided into two types:
Direct market access (DMA) providers
Some brokers offer both types of models for CFD trading (e.g. IG), while some are either exclusively market makers or DMA providers. There are pros and cons for each category and it is up to you to decide which model suits you best.
Market Makers, such as CMC Markets, charge lower commissions and have lesser capital requirements for you to start trading. Furthermore, market maker providers are usually able to offer a much larger variety of stocks and indices compared to their DMA counterparts.
However, conflict of interest issues might arise since essentially they are trading against you in order for them to make money. They earn revenue via the spread between ‘Bid’ and ‘Ask’ prices.
For example, the actual market bid/ask price might be 2.05/2.25 but the market maker will probably state a bid/ask price at 2.00/2.30 instead when facing against you.
DMA providers, such as Maybank Kim Eng, will send your orders directly to the order book but since they do not earn from the bid/ask spread like the market makers do, they will charge higher commissions. In addition, they also require a larger capital to start trading CFDs.
What are the CFD broker’s margin requirements?
Since CFD trading usually involves leverage, it is worth finding out the broker’s margin requirements for the various CFD products.
Since the CFD broking market is pretty competitive, the margin requirements are usually the same for all providers. For example, the margin rate or margin factor is usually 10% for normal shares, 5% for indices and 2% for forex.
For commodities, however, some brokers are able to offer lower margin rates for selected products such as gold and silver.
What types of products can be traded via the CFD broker?
Different brokers have different ranges of CFD products that are available to be traded and so you should check if a broker’s platform has the CFD instrument for your preferred market or asset type.
For example, most brokers that are DMA providers only offer CFDs in the local and regional markets and perhaps a few other major international offerings.
In contrast, as mentioned earlier, brokers which are market makers allow trading of CFDs in various markets around the world.
In terms of asset types, some brokers only offer a limited variety of commodities CFDs; or perhaps even none at all.
It should be noted that a lack of variety is not necessarily a big issue as long as the broker offers CFD products that you are comfortable or more familiar with. There is not much use to choose a broker that has a large selection if you are not going to trade the bulk of the offerings anyway.
What are the order types available via the CFD broker?
The order types available on a platform is an important aspect of risk management when you are doing CFD trading.
Features such as guaranteed stops are a crucial way of keeping losses under control when the market is behaving in a volatile manner. Other traders might prefer other options such as One Cancels Other (OCO) or Trailing Stops.
Does the CFD broker provide charting and analytical tools?
To increase your chances of doing well in the markets, you need to have access to as much information and resources as possible to better analyze your trades.
The ‘best’ CFD broker is different for everyone
As you can see, there are various points to carefully consider when searching for the CFD broker that best suits you.
What might be the ideal broker for someone else might not necessarily be the right fit for you; in fact, it is even possible that you end up using more than one broker since you might not be able to find a sole platform that has all your desired features.
Here is the list of CFD platforms
Without further ado, here are the platforms in Singapore that feature CFD trading as one of their service offerings.
Based on the factors listed above, you now have a quick checklist to conduct a detailed analysis of the various players to find the best match.
IG is the world’s number one CFD provider and has been awarded the Best Forex Provider in Singapore by Global Brands Magazine in 2016. It is a highly trusted company that is listed on the London Stock Exchange with a market capitalization of over £2.9bil (S$5.24 billion).
An established global market leader for over 40 years, IG provides investors with access to award-winning innovations in trading platform technology. The platform trades over 10,000 markets and offers tight spreads, low commissions and small margins.
IG also offers risk management tools to help you protect your profits and minimize your losses and thus enables you to trade with peace of mind. A particular highlight is IG’s innovative guaranteed stops that come free-of-charge unless your stop level is triggered.
CIMB Securities is a Direct Market Access (DMA) broker that allows you to trade in 17 global exchanges and access more than 9,500 stocks. You can go both long or short at up to 10 times leverage on Equities CFDs, or even 20 times leverage for CFDs on major Index Futures.
They also have an online platform to manage various baskets of stocks tied to an underlying theme, or otherwise known as TIPs (Thematic Investment Portfolios). Each TIP will be transacted as CFDs and thus it has all the characteristics of CFD trading such as leverage and the flexibility to take both long and short positions, among other things.
With the Maybank Kim Eng CFD, you will be able to gain leveraged exposure with up to 20 times leverage and you only need to put down a fraction of the total trade value to open long and short positions.
Another plus point about the Maybank Kim Eng CFD is that it has no expiry date – your positions will not be closed and reopened after 30 days. That means savings on additional opening and closing commissions, as well as other rollover costs. You can also hold your positions indefinitely, subject to the meeting of margin requirements.
4. Phillip CFD
Phillip CFD is one of the pioneers of CFD trading in Singapore, even winning the award for Largest CFD Provider from Investment Trends.
Phillip CFD offers more than 3,000 CFDs in the Singapore, United States, Hong Kong, Malaysia, China and Japan markets. Clients are able to trade via various proprietary platforms such as POEMS, POEMS 2.0, POEMS Mobile (iOS & Android) and CFDTrader 2.
They also offer advanced order types such as Stop Limit, One-Cancel-Other (OCO), Trailing Stop Limit, If Done, and Contingency for CFD trading activities.
5. City Index
City Index provides competitive pricing with tight, fixed spreads from one point on major indices and FX pairs, regardless of volatility, as well as attractive low commissions on equity CFDs of just 0.08% on SGD equities.
Watch out also for webinars provided by City Index to help you become a better CFD trader as well as gaining insights from industry professionals regarding key expectations for upcoming macro/market events.
Saxo Capital Markets offers more than 9,000 CFDs including Single Stocks, Stock Indices and Commodities – allowing you to trade CFDs in various global assets and markets.
With Index-tracking CFDs, you can trade multiple stock indices such as Germany 30, US500 and UK100 on real-time prices. This gives you more cost-efficient market exposure than trading individual shares.
For those who trade CFDs often, Saxo Capital Markets has a special scheme whereby if you execute 100 trades or more per calendar month on Single Stock CFDs, you will qualify for an Active Pricing Plan with some of the lowest rates in the market.
7. CMC Markets
CMC Markets has an award-winning CFD trading platform that provides access to over 10,000 global instruments, at competitive spreads and margin rates.
They also offer competitive monthly cash rebates for clients who trade CFDs in high volumes. If you meet the requirements for one particular asset class, such as indices for instance, then you will automatically qualify for monthly rebates on FX, shares and commodities as well.