When deciding whom to use to trade CFDs it is important that you look at the whole package not just the headline rate offered by your provider. Here we look at a trade between two different types of brokers.

Broker 1 offers commission at 0.2% on market prices, financing of –2%/+1.5% around Libor and an initial margin of 10%.

Broker 2 offers a fixed commission of £10 per trade but with a minimum spread dependant on the share price, financing of –2.5%/+2.5% around Libor and initial margin of 20%.

The client buys 25,000 UK Tele and then sells them 1 week later. The market when the trade is opened is 120p-120.25p and has moved to 130p-130.25p when the trade is closed.
Opening Trade

BROKER 1

Opening Trade

Quoted Price 120p-120.25p
Number of shares 25,000
Price 120.25p
Notional Value £30,062.50
Commission (0.20%) £60.13
Stamp Duty £0.00
Total Transaction Value £30,122.63
Initial Margin (10%) £3,006.25

Closing Trade

BROKER 2

Opening Trade

Quoted Price 120p-120.5p
Number of shares 25,000
Price 120.5p
Notional Value £30,125.00
Commission (0.20%) £10.00
Stamp Duty £0.00
Total Transaction Value £30,135.00
Initial Margin (10%) £6,025.00

Closing Trade

This example shows that it is important to take all factors into consideration when selecting who to trade CFDs with