CFDs(Contracts for Difference) have been used for many years. While until recently only large institutions used CFDs, now private investors in Europe have discovered the benefits of the product, particularly the ability to easily short an equity or index, and in the UK it is estimated that 20% of equity transactions are now transacted via CFDs. Here is a table to compare the differences between common stock and CFD.
|Ongoing cost||100% of purchase cost||Margin - initial margin and variation margin|
|Settlement date||Typically T + 3||×|
|Dividend||√||A long holder will usually receive a percentage of the dividend declared. A short holder have to pay the dividend.|
|Exchange base||Traded on the exchange||Traded with a broker counterparty|
|Voting rights||√ (depend on the type of stock)||×|