Financing in CFD trading

Financing of CFD tradingPreviously in the text, we have spoken a bit about the financing costs which arise in connection with an investor speculating in CFDs. This concerns the fact that an investor does not put up more than five to ten percent of their own capital into a CFD trade, but rather borrows the greatest part from the broker. It is therefore the broker who is supplying the greatest amount of the funds in a CFD contract. Therefore, the broker must also charge a particular fee in order to loan the capital for the investment and for this, the broker of course receives interest on the amount loaned. If the investor chooses a short position and acts as a seller and the trade (open contract) remains for an extended period of time, it may be possible that a payment of interest occurs from the brokerage firm.

There are however two different forms that occur within the calculation of the financing of a CFD contract, partly the financing costs and partly the interest.

Financing cost = ( V * STIBOR + X %)/365  x n

V: The value of the contract today
STIBOR: Reference interest rate
X: Constant from the broker
n: Number of days which the contract is to run
365 is the number days in one year


Interest charged = ( V * STIBOR - X %)/365  x n

V: The value of the contract today
STIBOR: Reference interest rate
X: Constant from the broker
n: Number of days which the contract is to run
365 is the number days in one year